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Tungsten Mining NL (ASX:TGN) shareholders might be concerned after seeing the share price drop 12% in the last month. But that doesn't displace its brilliant performance over three years. Indeed, the share price is up a whopping 430% in that time. So the recent fall doesn't do much to dampen our respect for the business. The thing to consider is whether there is still too much elation around the company's prospects.
See our latest analysis for Tungsten Mining
With just AU$45,000 worth of revenue in twelve months, we don't think the market considers Tungsten Mining to have proven its business plan. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Tungsten Mining will find or develop a valuable new mine before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. The 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. Of course, if you time it right, high risk investments like this can really pay off, as Tungsten Mining investors might know.
Tungsten Mining has plenty of cash in the bank, with net cash sitting at AU$35m, when it last reported (December 2018). That allows management to focus on growing the business, and not worry too much about raising capital. And given that the share price has shot up 74% per year, over 3 years, its fair to say investors are liking management's vision for the future. The image below shows how Tungsten Mining's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. However you can take a look at whether insiders have been buying up 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)?
We've already covered Tungsten Mining's share price action, but we should also mention its total shareholder return (TSR). 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. Tungsten Mining hasn't been paying dividends, but its TSR of 478% exceeds its share price return of 430%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.