Introducing Lucky Minerals (CVE:LKY), A Stock That Climbed 64% In The Last Three Years
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It hasn't been the best quarter for Lucky Minerals Inc. (CVE:LKY) shareholders, since the share price has fallen 25% in that time. But don't let that distract from the very nice return generated over three years. To wit, the share price did better than an index fund, climbing 64% during that period.
Check out our latest analysis for Lucky Minerals
With zero revenue generated over twelve months, we don't think that Lucky Minerals 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. It seems likely some shareholders believe that Lucky Minerals 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. 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 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). Of course, if you time it right, high risk investments like this can really pay off, as Lucky Minerals investors might know.
Our data indicates that Lucky Minerals had net debt of CA$1,721,342 when it last reported in December 2018. That makes it extremely high risk, in our view. So the fact that the stock is up 18% per year, over 3 years shows that high risks can lead to high rewards, sometimes. It's clear more than a few people believe in the potential. You can see in the image below, how Lucky Minerals's 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. 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
The last twelve months weren't great for Lucky Minerals shares, which cost holders 31%, while the market was up about 6.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Investors are up over three years, booking 18% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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 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 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. Thank you for reading.
