The Great Southern Mining (ASX:GSN) Share Price Is Up 88% And Shareholders Are Holding On

Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Great Southern Mining share price has climbed 88% in five years, easily topping the market return of 21% (ignoring dividends).

Check out our latest analysis for Great Southern Mining

Great Southern Mining recorded just AU$3,156 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 that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Great Southern Mining will find or develop a valuable new mine before too long.

We think companies that have neither significant revenues nor profits are pretty 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 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). Some Great Southern Mining investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

Our data indicates that Great Southern Mining had AU$394k more in total liabilities than it had cash, when it last reported in June 2019. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 105% per year, over 5 years , but we're happy for holders. Investors must really like its potential. You can see in the image below, how Great Southern Mining's cash levels have changed over time (click to see the values). The image below shows how Great Southern Mining's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

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. 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).

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Great Southern Mining's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Great Southern Mining hasn't been paying dividends, but its TSR of 136% exceeds its share price return of 88%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

It's good to see that Great Southern Mining has rewarded shareholders with a total shareholder return of 88% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 19% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.