Introducing Horizon Gold (ASX:HRN), A Stock That Climbed 49% In The Last Year
Horizon Gold Limited (ASX:HRN) shareholders might be concerned after seeing the share price drop 13% in the last quarter. But that doesn't change the fact that the returns over the last year have been pleasing. In that time we've seen the stock easily surpass the market return, with a gain of 49%.
See our latest analysis for Horizon Gold
We don't think Horizon Gold's revenue of AU$105,000 is enough to establish significant demand. 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 Horizon Gold finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
Our data indicates that Horizon Gold had AU$8.9m more in total liabilities than it had cash, when it last reported in June 2019. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 126% 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 Horizon Gold's cash levels have changed over time (click to see the values). You can see in the image below, how Horizon Gold's cash levels have changed over time (click to see the values).
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
Pleasingly, Horizon Gold's total shareholder return last year was 49%. What is absolutely clear is that is far preferable to the dismal 11% average annual loss suffered over the last three years. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 6 warning signs for Horizon Gold you should be aware of, and 3 of them shouldn't be ignored.
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 AU 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.
