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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 when you pick a company that is really flourishing, you can make more than 100%. To wit, the Orion Minerals Limited (ASX:ORN) share price has flown 177% in the last three years. How nice for those who held the stock! Also pleasing for shareholders was the 53% gain in the last three months.
See our latest analysis for Orion Minerals
Orion Minerals recorded just AU$6,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Orion Minerals finds some valuable resources, before it runs out of money.
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 almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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 Orion 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
Orion Minerals had net debt of AU$12,514,000 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 40% 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 Orion Minerals's cash and debt levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. One thing you can do is check if company insiders are buying 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.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Orion Minerals's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Orion Minerals's TSR, at 177% is higher than its share price return of 177%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.