Some Balto Resources Ltd. (CVE:BAL.H) shareholders are probably rather concerned to see the share price fall 42% over the last three months. But that does not change the realty that the stock’s performance has been terrific, over five years. In fact, during that period, the share price climbed 650%. Impressive! So it might be that some shareholders are taking profits after good performance. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.
It really delights us to see such great share price performance for investors.
See our latest analysis for Balto Resources
Balto 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 Balto 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Balto Resources 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
Balto Resources had net debt of CA$1,071,496 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. So the fact that the stock is up 50% per year, over 5 years shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. The image belows shows how Balto Resources’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying shares. It’s often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
Investors in Balto Resources had a tough year, with a total loss of 42%, against a market gain of about 3.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 50% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. You could get a better understanding of Balto Resources’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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.