It is doubtless a positive to see that the MetalsGrove Mining Limited (ASX:MGA) share price has gained some 67% in the last three months. But that is minimal compensation for the share price under-performance over the last year. The cold reality is that the stock has dropped 15% in one year, under-performing the market.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.
See our latest analysis for MetalsGrove Mining
With just AU$50,386 worth of revenue in twelve months, we don’t think the market considers MetalsGrove Mining to have proven its business plan. This state of affairs suggests that venture capitalists won’t provide funds on attractive terms. 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 MetalsGrove Mining 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 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.
When it last reported its balance sheet in June 2024, MetalsGrove Mining had cash in excess of all liabilities of AU$2.6m. That’s not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 15% in the last year , it seems likely that the need for cash is weighing on investors’ minds. The image below shows how MetalsGrove Mining’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? I’d like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
What About The Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between MetalsGrove Mining’s total shareholder return (TSR) and its share price return. 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 MetalsGrove Mining’s TSR, at 13% is higher than its share price return of -15%. 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
We’re happy to report that MetalsGrove Mining are up 13% over the year. The bad news is that’s no better than the average market return, which was roughly 21%. Shareholders are doubtless excited that the stock price has been doing even better lately, with a gain of 67% in just ninety days. It’s worth taking note when returns accelerate, as it can indicate positive change in the underlying business, and winners often keep winning. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 6 warning signs for MetalsGrove Mining (5 make us uncomfortable!) that you should be aware of before investing here.
MetalsGrove Mining is not the only stock that insiders are buying. For those who like to find lesser know companies 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 Australian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.