Agrimin (ASX:AMN) Shareholders Have Enjoyed An Impressive 129% Share Price Gain
Some Agrimin Limited (ASX:AMN) shareholders are probably rather concerned to see the share price fall 33% over the last three months. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 129% higher today. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 46% decline over the last twelve months.
View our latest analysis for Agrimin
We don't think Agrimin's revenue of AU$9,098 is enough to establish significant demand. 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 Agrimin will find or develop a valuable new mine before too long.
Companies that lack both meaningful revenue and profits are usually considered 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 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. Some Agrimin 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.
When it reported in December 2019 Agrimin had minimal cash in excess of all liabilities consider its expenditure: just AU$1.8m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. Given how low on cash it got, investors must really like its potential for the share price to be up 90% per year, over 5 years. The image below shows how Agrimin'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. One thing you can do is check if company insiders are buying shares. It's often positive if so, assuming the buying is sustained and meaningful. 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 Agrimin'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 Agrimin's TSR, at 136% is higher than its share price return of 129%. 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.
A Different Perspective
While the broader market lost about 15% in the twelve months, Agrimin shareholders did even worse, losing 46%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 19% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Agrimin has 7 warning signs (and 3 which shouldn't be ignored) we think you should know about.
Agrimin is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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. Thank you for reading.
