Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the Riley Resources Corp. (CVE:RLY) share price is 38% higher than it was a year ago, much better than the market return of around -2.8% (not including dividends) in the same period. That's a solid performance by our standards! Riley Resources hasn't been listed for long, so it's still not clear if it is a long term winner.

View our latest analysis for Riley Resources

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

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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).

Riley Resources had cash in excess of all liabilities of CA$241k when it last reported (March 2019). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. Given the share price has increased by a solid 38% in the last year, its fair to say investors remain excited about the future, despite the potential need for cash. You can see in the image below, how Riley 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 Riley Resources's cash levels have changed over time.

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

Riley Resources boasts a total shareholder return of 38% for the last year. We regret to report that the share price is down 4.8% over ninety days. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

We will like Riley Resources better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.