Investing in Bougainville Copper (ASX:BOC) five years ago would have delivered you a 128% gain

Bougainville Copper Limited (ASX:BOC) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 128% higher today. To some, the recent pullback wouldn't be surprising after such a fast rise. Of course, that doesn't necessarily mean it's cheap now.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Bougainville Copper

Bougainville Copper recorded just K4,008,000 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 shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Bougainville Copper finds some valuable resources, before it runs out of money.

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 to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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). Bougainville Copper has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

Bougainville Copper had liabilities exceeding cash by K3.0m when it last reported in June 2023, according to our data. That puts it in the highest risk category, according to our analysis. So the fact that the stock is up 91% per year, over 5 years shows that high risks can lead to high rewards, sometimes. It's clear more than a few people believe in the potential. You can see in the image below, how Bougainville Copper's cash levels have changed over time (click to see the values).

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. 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. You can click here to see if there are insiders buying.

A Different Perspective

It's good to see that Bougainville Copper has rewarded shareholders with a total shareholder return of 16% in the last twelve months. However, that falls short of the 18% TSR per annum it has made for shareholders, each year, over five years. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Bougainville Copper , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.