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Zonte Metals Inc. (CVE:ZON) shareholders might be concerned after seeing the share price drop 19% in the last month. But that doesn't change the fact that the returns over the last half decade have been spectacular. In that time, the share price has soared some 325% higher! Arguably, the recent fall is to be expected after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.
With zero revenue generated over twelve months, we don't think that Zonte Metals has proved its business plan yet. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Zonte Metals finds some valuable resources, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Of course, if you time it right, high risk investments like this can really pay off, as Zonte Metals investors might know.
Our data indicates that Zonte Metals had CA$676,121 more in total liabilities than it had cash, when it last reported in October 2018. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 34% per year, over 5 years, but we're happy for holders. Investors must really like its potential. You can click on the image below to see (in greater detail) how Zonte Metals's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. One thing you can do is check if company insiders are buying shares. It's often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.
A Different Perspective
It's nice to see that Zonte Metals shareholders have received a total shareholder return of 34% over the last year. That gain is better than the annual TSR over five years, which is 34%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before spending more time on Zonte Metals it might be wise to click here to see if insiders have been buying or selling shares.
Of course Zonte Metals may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.