Is Optizen Labs's (WSE:OPT) Share Price Gain Of 140% Well Earned?

When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Optizen Labs S.A. (WSE:OPT) share price has soared 140% in the last year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 59% over the last quarter. And shareholders have also done well over the long term, with an increase of 130% in the last three years.

See our latest analysis for Optizen Labs

Optizen Labs recorded just zł1,012,000 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 that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Optizen Labs can make progress and gain better traction for the business, before it runs low on cash.

We think companies that have neither significant revenues nor profits are pretty 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. Some Optizen Labs investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

Our data indicates that Optizen Labs had zł1.6m more in total liabilities than it had cash, when it last reported in December 2019. That puts it in the highest risk category, according to our analysis. So the fact that the stock is up 87% in the last year shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. You can click on the image below to see (in greater detail) how Optizen Labs's cash levels have changed over time.

Of course, the truth is that it is hard to value companies without much revenue or profit. However you can take a look at whether insiders have been buying up 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

It's nice to see that Optizen Labs shareholders have received a total shareholder return of 140% over the last year. That certainly beats the loss of about 6.1% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Optizen Labs better, we need to consider many other factors. For example, we've discovered 5 warning signs for Optizen Labs (3 shouldn't be ignored!) that you should be aware of before investing here.

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 PL 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.