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The Stone Resources Australia (ASX:SHK) Share Price Has Gained 100% And Shareholders Are Hoping For More

Simply Wall St

The Stone Resources Australia Limited (ASX:SHK) share price has had a bad week, falling 20%. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 100% in that time.

Check out our latest analysis for Stone Resources Australia

Stone Resources Australia recorded just AU$298,431 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 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 Stone Resources Australia 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 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). Stone Resources Australia has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

Stone Resources Australia had liabilities exceeding cash by AU$62m when it last reported in December 2019, according to our data. That makes it extremely high risk, in our view. So we're surprised to see the stock up 100% per year, over 5 years , but we're happy for holders. It's clear more than a few people believe in the potential. The image below shows how Stone Resources Australia's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

ASX:SHK Historical Debt May 5th 2020
ASX:SHK Historical Debt May 5th 2020

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. 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

We're pleased to report that Stone Resources Australia shareholders have received a total shareholder return of 100% over one year. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Take risks, for example - Stone Resources Australia has 5 warning signs (and 4 which can't be ignored) we think you should know about.

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.