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It might be of some concern to shareholders to see the Tanzanian Gold Corporation (TSE:TNX) share price down 22% in the last month. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. To wit, the share price did better than an index fund, climbing 55% during that period.

Check out our latest analysis for Tanzanian Gold

Tanzanian Gold didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Tanzanian Gold will find or develop a valuable new mine before too long.

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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Tanzanian Gold has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

Tanzanian Gold had liabilities exceeding cash by CA$17,245,177 when it last reported in February 2019, according to our data. That makes it extremely high risk, in our view. So the fact that the stock is up 16% 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. The image below shows how Tanzanian Gold's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

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. You can click here to see if there are insiders buying.

A Different Perspective

It's nice to see that Tanzanian Gold shareholders have received a total shareholder return of 18% over the last year. There's no doubt those recent returns are much better than the TSR loss of 14% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. Before spending more time on Tanzanian Gold it might be wise to click here to see if insiders have been buying or selling shares.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.