Australian Silica Quartz Group (ASX:ASQ) Shares Have Generated A Total Return Of 31% In The Last Five Years

Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Australian Silica Quartz Group Ltd. (ASX:ASQ) shareholders for doubting their decision to hold, with the stock down 58% over a half decade. The good news is that the stock is up 22% in the last week.

View our latest analysis for Australian Silica Quartz Group

Australian Silica Quartz Group recorded just AU$117,481 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Australian Silica Quartz Group will find or develop a valuable new mine before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Australian Silica Quartz Group has already given some investors a taste of the bitter losses that high risk investing can cause.

When it last reported its balance sheet in June 2019, Australian Silica Quartz Group could boast a strong position, with cash in excess of all liabilities of AU$4.0m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 16% per year, over 5 years , it seems like the market might have been over-excited previously. You can see in the image below, how Australian Silica Quartz Group's cash levels have changed over time (click to see the values). The image below shows how Australian Silica Quartz Group'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. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. You can click here to see if there are insiders selling.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Australian Silica Quartz Group's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Australian Silica Quartz Group hasn't been paying dividends, but its TSR of 31% exceeds its share price return of -58%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Investors in Australian Silica Quartz Group had a tough year, with a total loss of 12%, against a market gain of about 25%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 5.6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Australian Silica Quartz Group (including 2 which is can't be ignored) .

But note: Australian Silica Quartz Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.