Investors Who Bought Pathfinder Minerals (LON:PFP) Shares Three Years Ago Are Now Up 165%

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

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For example, the Pathfinder Minerals Plc (LON:PFP) share price has soared 165% in the last three years. That sort of return is as solid as granite. It's also good to see the share price up 61% over the last quarter.

See our latest analysis for Pathfinder Minerals

With zero revenue generated over twelve months, we don't think that Pathfinder Minerals has proved its business plan yet. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that Pathfinder Minerals finds some valuable resources, before it runs out of money.

We think companies that have neither significant revenues nor profits are pretty high risk. There 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 Pathfinder Minerals 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.

Our data indicates that Pathfinder Minerals had UK£245,000 more in total liabilities than it had cash, when it last reported in June 2018. That puts it in the highest risk category, according to our analysis. So the fact that the stock is up 38% per year, over 3 years shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. You can click on the image below to see (in greater detail) how Pathfinder Minerals's cash levels have changed over time.

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. One thing you can do is check if company insiders are buying 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 Pathfinder Minerals shareholders have received a total shareholder return of 84% over the last year. There's no doubt those recent returns are much better than the TSR loss of 13% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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