The First Vanadium (CVE:FVAN) Share Price Is Up 3000% And Shareholders Are Euphoric

The last three months have been tough on First Vanadium Corp. (CVE:FVAN) shareholders, who have seen the share price decline a rather worrying 31%. But that doesn't change the fact that the returns over the last three years have been spectacular. Over that time, we've been excited to watch the share price climb an impressive 3000%. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The thing to consider is whether there is still too much elation around the company's prospects.

We love happy stories like this one. The company should be really proud of that performance!

View our latest analysis for First Vanadium

First Vanadium didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). 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 First Vanadium will find or develop a valuable new mine before too long.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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). First Vanadium has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

First Vanadium had net cash of CA$2.7m when it last reported (August 2018). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. Given the share price has increased by a solid 214% per year, over 3 years, its fair to say investors remain excited about the future, despite the potential need for cash. You can see in the image below, how First Vanadium's cash and debt 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. However you can take a look at whether insiders have been buying up 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

We're pleased to report that First Vanadium shareholders have received a total shareholder return of 70% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 51% 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. If you would like to research First Vanadium in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

Of course First Vanadium may not be the best stock to buy. So you may wish to see this freecollection of growth stocks.

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.