Yahoo Finance A Look At Nelson Resources' (ASX:NES) Share Price Returns
Nelson Resources Limited (ASX:NES) shareholders should be happy to see the share price up 30% in the last quarter.
Check out our latest analysis for Nelson Resources
With just AU$25,855 worth of revenue in twelve months, we don't think the market considers Nelson Resources to have proven its business plan. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Nelson Resources 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 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.
Nelson Resources had liabilities exceeding cash by AU$2.2m when it last reported in June 2020, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 12% in the last year , it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Nelson Resources' 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. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Nelson Resources' total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Nelson Resources' TSR, at 3.5% is higher than its share price return of -12%. 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
Nelson Resources boasts a total shareholder return of 3.5% for the last year. And the share price momentum remains respectable, with a gain of 30% in the last three months. This suggests the company is continuing to win over new investors. 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. Like risks, for instance. Every company has them, and we've spotted 6 warning signs for Nelson Resources (of which 5 are a bit unpleasant!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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. 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.
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