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Active investing isn't easy, but for those that do it, the aim is to find the best companies to buy, and to profit handsomely. When you find (and hold) a big winner, you can markedly improve your finances. For example, Energy Fuels Inc. (TSE:EFR) has generated a beautiful 327% return in just a single year. It's also good to see the share price up 68% over the last quarter. Looking back further, the stock price is 200% higher than it was three years ago.
Energy Fuels recorded just US$1,975,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Energy Fuels finds fossil fuels with an exploration program, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered 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 do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Some Energy Fuels investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.
Energy Fuels had liabilities exceeding cash by US$6.5m when it last reported in September 2020, according to our data. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 56% in the last year , but we're happy for holders. It's clear more than a few people believe in the potential. You can see in the image below, how Energy Fuels' cash levels have changed over time (click to see the values).
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. Given that situation, many of the best investors like to check if insiders have been buying 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 good to see that Energy Fuels has rewarded shareholders with a total shareholder return of 327% in the last twelve months. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Energy Fuels better, we need to consider many other factors. Take risks, for example - Energy Fuels has 6 warning signs we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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