Despite currently being unprofitable, Lincoln Minerals (ASX:LML) has delivered a 84% return to shareholders over 5 years

Ideally, your overall portfolio should beat the market average. But if you pick the right individual stocks, you could make more -- or less -- than that. While the Lincoln Minerals Limited (ASX:LML) share price is down 17% over half a decade, the total return to shareholders (which includes dividends) was 84%. And that total return actually beats the market return of 45%.

After losing 17% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Lincoln Minerals

With zero revenue generated over twelve months, we don't think that Lincoln Minerals has proved its business plan yet. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Lincoln Minerals finds some valuable resources, before it runs out of money.

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 to raise equity. 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.

When it reported in June 2024 Lincoln Minerals had minimal cash in excess of all liabilities consider its expenditure: just AU$2.2m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 3% per year, over 5 years. You can see in the image below, how Lincoln Minerals' 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. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Lincoln Minerals' 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. We note that Lincoln Minerals' TSR, at 84% is higher than its share price return of -17%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

Investors in Lincoln Minerals had a tough year, with a total loss of 17%, against a market gain of about 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. 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. 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. Take risks, for example - Lincoln Minerals has 5 warning signs (and 4 which make us uncomfortable) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.