The Empresas Iansa (SNSE:IANSA) Share Price Is Up 100% And Shareholders Are Holding On

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Empresas Iansa S.A. (SNSE:IANSA) share price is up 100% in the last year, clearly besting the market decline of around 3.4% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 2.8% lower than it was three years ago.

Check out our latest analysis for Empresas Iansa

With just US$400,985,000 worth of revenue in twelve months, we don't think the market considers Empresas Iansa to have proven its business plan. 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 Empresas Iansa will significantly advance the business plan 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. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. 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. Of course, if you time it right, high risk investments like this can really pay off, as Empresas Iansa investors might know.

Our data indicates that Empresas Iansa had US$249m more in total liabilities than it had cash, when it last reported in December 2020. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 100% in the last year , but we're happy for holders. It's clear more than a few people believe in the potential. You can see in the image below, how Empresas Iansa's cash levels have changed over time (click to see the values).

Of course, the truth is that it is hard to value companies without much 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. You can click here to see if there are insiders buying.

A Different Perspective

It's nice to see that Empresas Iansa shareholders have received a total shareholder return of 100% over the last year. That certainly beats the loss of about 2% 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's always interesting to track share price performance over the longer term. But to understand Empresas Iansa better, we need to consider many other factors. For instance, we've identified 3 warning signs for Empresas Iansa (2 are potentially serious) that you should be aware of.

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 CL 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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