Yahoo Finance The IODM (ASX:IOD) Share Price Is Up 1150% And Shareholders Are Euphoric
Active investing isn't easy, but for those that do it, the aim is to find the best companies to buy, and to profit handsomely. When you find (and hold) a big winner, you can markedly improve your finances. For example, IODM Limited (ASX:IOD) has generated a beautiful 1150% return in just a single year. Also pleasing for shareholders was the 150% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. And shareholders have also done well over the long term, with an increase of 775% in the last three years.
We love happy stories like this one. The company should be really proud of that performance!
Check out our latest analysis for IODM
With just AU$815,968 worth of revenue in twelve months, we don't think the market considers IODM to have proven its business plan. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that IODM 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some IODM 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.
Our data indicates that IODM had AU$298k more in total liabilities than it had cash, when it last reported in June 2019. That makes it extremely high risk, in our view. So the fact that the stock is up 25% in the last year shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. The image below shows how IODM's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can click on the image below to see (in greater detail) how IODM's cash levels have changed over time.
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. If they are buying a significant amount of shares, that's certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
We're pleased to report that IODM rewarded shareholders with a total shareholder return of 1150% over the last year. That gain actually surpasses the 106% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting IODM on your watchlist. 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.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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.
