For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Therma Bright Inc. (CVE:THRM) share price has soared 400% over five years. This just goes to show the value creation that some businesses can achieve.
We don’t think Therma Bright’s revenue of CA$6,002 is enough to establish significant demand. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that Therma Bright can make progress and gain better traction for the business, before it runs low on cash.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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). Therma Bright has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Therma Bright had liabilities exceeding cash by CA$616k when it last reported in April 2019, according to our data. That puts it in the highest risk category, according to our analysis. So we’re surprised to see the stock up 50% per year, over 5 years , but we’re happy for holders. It’s clear more than a few people believe in the potential. The image below shows how Therma Bright’s balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how Therma Bright’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. You can click here to see if there are insiders buying.
A Different Perspective
Investors in Therma Bright had a tough year, with a total loss of 17%, against a market gain of about 8.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 38% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you would like to research Therma Bright 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 Therma Bright may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.