Does Fox River Resources’s (CNSX:FOX) Share Price Gain of 30% Match Its Business Performance?

Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Fox River Resources Corporation (CNSX:FOX) share price is up 30% in the last year, clearly besting than the market return of around 0.02% (not including dividends). That’s a solid performance by our standards! Note that businesses generally develop over the long term, so it the returns over the last year might not reflect a long term trend.

See our latest analysis for Fox River Resources

Fox River Resources hasn’t yet reported any revenue yet, so it’s as much a business idea as a business. 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 Fox River Resources finds some valuable resources, before it runs out of money.

We think companies that have neither significant revenues nor profits are pretty high risk. The 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).

Fox River Resources has plenty of cash in the bank, with net cash sitting at CA$1.1m, when it last reported (October 2018). That allows management to focus on growing the business, and not worry too much about raising capital. And given that the share price has shot up 30% in the last year, its fair to say investors are liking management’s vision for the future. The image belows shows how Fox River Resources’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.

CNSX:FOX Historical Debt, March 12th 2019
CNSX:FOX Historical Debt, March 12th 2019

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. Given that situation, many of the best investors like to check if insiders have been buying shares. If they are buying a significant amount of shares, that’s certainly a good thing. You can click here to see if there are insiders buying.

A Different Perspective

It’s nice to see that Fox River Resources shareholders have gained 30% over the last year. And the share price momentum remains respectable, with a gain of 8.3% in the last three months. This suggests the company is continuing to win over new investors. If you would like to research Fox River Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

We will like Fox River Resources better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

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.

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. Thank you for reading.