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If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Colibri Resource Corporation (CVE:CBI) share price is up 29% in the last year, clearly besting than the market return of around -2.8% (not including dividends). So that should have shareholders smiling. Colibri Resource hasn’t been listed for long, so it’s still not clear if it is a long term winner.
Colibri Resource 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). 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 Colibri Resource will find or develop a valuable new mine before too long.
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 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).
Colibri Resource had liabilities exceeding cash by CA$522,062 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 29% in the last year shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. The image below shows how Colibri Resource’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. 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
Colibri Resource boasts a total shareholder return of 29% for the last year. Unfortunately the share price is down 10.0% over the last quarter. Shorter term share price moves often don’t signify much about the business itself. If you would like to research Colibri Resource in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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 email@example.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.