Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the RJK Explorations Ltd. (CVE:RJX.A) share price is up 90% in the last year, clearly besting than the market return of around -1.2% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 37% in three years.
RJK Explorations hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. For example, investors may be hoping that RJK Explorations finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some RJK Explorations 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.
When it reported in March 2019 RJK Explorations had minimal cash in excess of all liabilities consider its expenditure: just CA$224k to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. It's a testament to the popularity of the business plan that the share price gained 90% in the last year, despite the weak balance sheet. The image below shows how RJK Explorations's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
It's good to see that RJK Explorations has rewarded shareholders with a total shareholder return of 90% in the last twelve months. That certainly beats the loss of about 14% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
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 email@example.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.