Lithium Consolidated Limited (ASX:LI3) shareholders will doubtless be very grateful to see the share price up 107% in the last month. But in truth the last year hasn't been good for the share price. The cold reality is that the stock has dropped 14% in one year, under-performing the market.
View our latest analysis for Lithium Consolidated
Lithium Consolidated recorded just AU$19,928 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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. For example, investors may be hoping that Lithium Consolidated finds some valuable resources, before it runs out of money.
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).
Lithium Consolidated had net cash of just AU$974k when it last reported (December 2018). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 14% in the last year. You can click on the image below to see (in greater detail) how Lithium Consolidated'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.
A Different Perspective
Given that the market gained 11% in the last year, Lithium Consolidated shareholders might be miffed that they lost 14%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's great to see a nice little 32% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). 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.