It's been a soft week for Energy Fuels Inc. (TSE:EFR) shares, which are down 13%. But that doesn't detract from the splendid returns of the last year. During that period, the share price soared a full 219%. So some might not be surprised to see the price retrace some. Only time will tell if there is still too much optimism currently reflected in the share price.
With just US$1,658,000 worth of revenue in twelve months, we don't think the market considers Energy Fuels to have proven its business plan. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Energy Fuels will discover or develop fossil fuel before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Energy Fuels 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 Energy Fuels had US$3.3m more in total liabilities than it had cash, when it last reported in December 2020. That makes it extremely high risk, in our view. So the fact that the stock is up 70% in the last year shows that high risks can lead to high rewards, sometimes. 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 Energy Fuels' 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. You can click here to see if there are insiders buying.
A Different Perspective
We're pleased to report that Energy Fuels shareholders have received a total shareholder return of 219% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 18% 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. 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. To that end, you should be aware of the 5 warning signs we've spotted with Energy Fuels .
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 CA exchanges.
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