Yahoo Finance If You Had Bought Wide Open Agriculture (ASX:WOA) Shares A Year Ago You'd Have Made 33%
Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Wide Open Agriculture Limited (ASX:WOA) share price is up 33% in the last year, clearly besting the market return of around 13% (not including dividends). So that should have shareholders smiling. Wide Open Agriculture hasn't been listed for long, so it's still not clear if it is a long term winner.
View our latest analysis for Wide Open Agriculture
With just AU$305,708 worth of revenue in twelve months, we don't think the market considers Wide Open Agriculture to have proven its business plan. 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. It seems likely some shareholders believe that Wide Open Agriculture will significantly advance the business plan before too long.
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 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 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).
When it last reported its balance sheet in June 2019, Wide Open Agriculture had cash in excess of all liabilities of AU$2.2m. 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 up 137% in the last year , the market is seems hopeful about the potential, despite the cash burn. You can see in the image below, how Wide Open Agriculture's cash levels have changed over time (click to see the values). You can see in the image below, how Wide Open Agriculture's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.
A Different Perspective
Wide Open Agriculture shareholders should be happy with the total gain of 33% over the last twelve months. The more recent returns haven't been as impressive as the longer term returns, coming in at just 3.2%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
We will like Wide Open Agriculture better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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. Thank you for reading.
