Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Equus Mining share price has climbed 67% in five years, easily topping the market return of 7.1% (ignoring dividends).
See our latest analysis for Equus Mining
With zero revenue generated over twelve months, we Equus Mining has proved its business plan yet. 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 Equus Mining finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Of course, if you time it right, high risk investments like this can really pay off, as Equus Mining investors might know.
Equus Mining had net cash of just AU$73k when it last reported (June 2018). So if it hasn’t remedied the situation already, it will almost certainly have to raise more capital soon. It’s a testament to the popularity of the business plan that the share price gained 11% per year, over 5 years, despite the weak balance sheet. You can click on the image below to see (in greater detail) how Equus Mining’s cash and debt levels have changed over time.
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. However you can take a look at whether insiders have been buying up 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
While the broader market gained around 9.3% in the last year, Equus Mining shareholders lost 53%. 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. On the bright side, long term shareholders have made money, with a gain of 11% 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Equus Mining by clicking this link.
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 AU 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 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. Thank you for reading.