EnviroLeach Technologies Inc. (CSE:ETI) shareholders might be concerned after seeing the share price drop 30% in the last quarter. But looking back over the last year, the returns have actually been rather pleasing! To wit, it had solidly beat the market, up 36%.
We don’t think EnviroLeach Technologies’s revenue of CA$370,316 is enough to establish significant demand. 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 EnviroLeach Technologies 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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
Our data indicates that EnviroLeach Technologies had CA$2.2m more in total liabilities than it had cash, when it last reported in September 2019. That puts it in the highest risk category, according to our analysis. So the fact that the stock is up 135% 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 EnviroLeach Technologies’s balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how EnviroLeach Technologies’s cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, many of the best investors like to check if insiders have been 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 nice to see that EnviroLeach Technologies shareholders have gained 36% over the last year. Unfortunately the share price is down 30% over the last quarter. Shorter term share price moves often don’t signify much about the business itself. It’s always interesting to track share price performance over the longer term. But to understand EnviroLeach Technologies better, we need to consider many other factors. For instance, we’ve identified 6 warning signs for EnviroLeach Technologies (2 are potentially serious) that you should be aware of.
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 CA exchanges.
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.
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