These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the MetalsTech Limited (ASX:MTC) share price is up 89% in the last year, clearly besting the market return of around 15% (not including dividends). That's a solid performance by our standards! MetalsTech hasn't been listed for long, so it's still not clear if it is a long term winner.
MetalsTech hasn't yet reported any revenue, so it's as much a business idea as an actual business. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that MetalsTech will find or develop a valuable new mine before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. MetalsTech has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
MetalsTech had liabilities exceeding cash by AU$816k when it last reported in June 2019, according to our data. That puts it in the highest risk category, according to our analysis. So the fact that the stock is up 104% in the last year shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. You can see in the image below, how MetalsTech's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how MetalsTech's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
MetalsTech shareholders should be happy with the total gain of 89% over the last twelve months. And the share price momentum remains respectable, with a gain of 253% in the last three months. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. It's always interesting to track share price performance over the longer term. But to understand MetalsTech better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 7 warning signs for MetalsTech (of which 4 are a bit concerning!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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