When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term Lion One Metals Limited (CVE:LIO) shareholders would be well aware of this, since the stock is up 103% in five years. Also pleasing for shareholders was the 54% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.
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With zero revenue generated over twelve months, we don't think that Lion One Metals has proved its business plan yet. 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. It seems likely some shareholders believe that Lion One Metals 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Of course, if you time it right, high risk investments like this can really pay off, as Lion One Metals investors might know.
Lion One Metals had cash in excess of all liabilities of just CA$10m when it last reported (March 2019). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. Given how low on cash the it got, investors must really like its potential for the share price to be up 15% per year, over 5 years. You can see in the image below, how Lion One Metals's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying 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 Lion One Metals has rewarded shareholders with a total shareholder return of 21% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 15% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. If you would like to research Lion One Metals in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 firstname.lastname@example.org. 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.