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The Spruce Ridge Resources (CVE:SHL) Share Price Has Gained 125%, So Why Not Pay It Some Attention?

Simply Wall St

The most you can lose on any stock (assuming you don't use leverage) is 100% of 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 Spruce Ridge Resources Ltd. (CVE:SHL) which saw its share price drive 125% higher over five years. It's also up 13% in about a month.

See our latest analysis for Spruce Ridge Resources

With zero revenue generated over twelve months, we don't think that Spruce Ridge Resources 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. For example, investors may be hoping that Spruce Ridge Resources finds some valuable resources, before it runs out of money.

We think companies that have neither significant revenues nor profits are pretty 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Of course, if you time it right, high risk investments like this can really pay off, as Spruce Ridge Resources investors might know.

Spruce Ridge Resources had liabilities exceeding cash by CA$632,746 when it last reported in January 2019, 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 18% per year, over 5 years, but we're happy for holders. Investors must really like its potential. You can see in the image below, how Spruce Ridge Resources's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how Spruce Ridge Resources's cash levels have changed over time.

TSXV:SHL Historical Debt, July 25th 2019

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 usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

It's nice to see that Spruce Ridge Resources shareholders have received a total shareholder return of 50% over the last year. That gain is better than the annual TSR over five years, which is 18%. 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. Before spending more time on Spruce Ridge Resources it might be wise to click here to see if insiders have been buying or selling shares.

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.