Did You Miss Focus Minerals' (ASX:FML) 41% Share Price Gain?

It hasn't been the best quarter for Focus Minerals Limited (ASX:FML) shareholders, since the share price has fallen 19% in that time. But that doesn't change the reality that over twelve months the stock has done really well. To wit, it had solidly beat the market, up 41%.

Check out our latest analysis for Focus Minerals

We don't think Focus Minerals' revenue of AU$3,793,000 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. It seems likely some shareholders believe that Focus Minerals will find or develop a valuable new mine before too long.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 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).

Our data indicates that Focus Minerals had AU$22m more in total liabilities than it had cash, when it last reported in June 2020. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 131% in the last year , but we're happy for holders. It's clear more than a few people believe in the potential. You can click on the image below to see (in greater detail) how Focus Minerals' cash levels have changed over time.

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. It's usually a positive if they have, as it may indicate they see value in the stock. 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 Focus Minerals shareholders have received a total shareholder return of 41% over the last year. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Focus Minerals (at least 1 which is concerning) , and understanding them should be part of your investment process.

Of course Focus Minerals 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 AU exchanges.

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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. 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.
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