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Introducing Canada Rare Earth (CVE:LL), The Stock That Zoomed 117% In The Last Five Years

Simply Wall St

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Canada Rare Earth Corp. (CVE:LL) which saw its share price drive 117% higher over five years. It's also up 44% in about a month.

View our latest analysis for Canada Rare Earth

With just CA$1,015,872 worth of revenue in twelve months, we don't think the market considers Canada Rare Earth to have proven its business plan. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Canada Rare Earth will find or develop a valuable new mine before too long.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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. Canada Rare Earth has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

Canada Rare Earth had liabilities exceeding cash by CA$305k when it last reported in September 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 94% per year, over 5 years shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. The image below shows how Canada Rare Earth's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can click on the image below to see (in greater detail) how Canada Rare Earth's cash levels have changed over time.

TSXV:LL Historical Debt, January 3rd 2020

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. However you can take a look at whether insiders have been buying up shares. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.

A Different Perspective

It's nice to see that Canada Rare Earth shareholders have received a total shareholder return of 30% over the last year. That gain is better than the annual TSR over five years, which is 17%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.