If You Had Bought RJK Explorations (CVE:RJX.A) Shares A Year Ago You'd Have Made 120%

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! Take, for example RJK Explorations Ltd. (CVE:RJX.A). Its share price is already up an impressive 120% in the last twelve months. Better yet, the share price has risen 22% in the last week. However, the longer term returns haven't been so impressive, with the stock up just 10.0% in the last three years.

Check out our latest analysis for RJK Explorations

With zero revenue generated over twelve months, we don't think that RJK Explorations has proved its business plan yet. 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. It seems likely some shareholders believe that RJK Explorations will find or develop a valuable new mine before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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). Some RJK Explorations 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.

RJK Explorations had cash in excess of all liabilities of just CA$224k when it last reported (March 2019). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. Given how low on cash the it got, investors must really like its potential for the share price to be up 120% in the last year. The image below shows how RJK Explorations'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. However you can take a look at whether insiders have been buying up shares. It's usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

It's nice to see that RJK Explorations shareholders have received a total shareholder return of 120% over the last year. That certainly beats the loss of about 6.0% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.