ROK Resources (CVE:ROK) Has Compensated Shareholders With A 307% Return On Their Investment

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more -- or less -- than that. While the ROK Resources Inc. (CVE:ROK) share price is down 86% over half a decade, the total return to shareholders (which includes dividends) was 307%. And that total return actually beats the market return of 50%. The falls have accelerated recently, with the share price down 13% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for ROK Resources

We don't think ROK Resources' revenue of CA$378,908 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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, they may be hoping that ROK Resources finds fossil fuels with an exploration program, before it runs out of money.

Companies that lack both meaningful revenue and profits are usually considered high risk. We can see that they needed to raise more capital, and took that step recently despite the fact that it would have been dilutive 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. It certainly is a dangerous place to invest, as ROK Resources investors might realise.

ROK Resources had liabilities exceeding cash when it last reported, according to our data. That put it in the highest risk category, according to our analysis. But since the share price has dived 32% per year, over 5 years , it looks like some investors think it's time to abandon ship, so to speak, even though the cash reserves look a little better with the capital raising. The image below shows how ROK Resources' balance sheet has changed over time; if you want to see the precise values, simply click on the image.

Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between ROK Resources' total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. ROK Resources hasn't been paying dividends, but its TSR of 307% exceeds its share price return of -86%, 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 ROK Resources has rewarded shareholders with a total shareholder return of 50% in the last twelve months. That gain is better than the annual TSR over five years, which is 32%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 3 warning signs for ROK Resources (2 don't sit too well with us) that you should be aware of.

ROK Resources is not the only stock that insiders are buying. 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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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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