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The Okapi Resources (ASX:OKR) Share Price Has Gained 34% And Shareholders Are Hoping For More

Simply Wall St

If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Okapi Resources Limited (ASX:OKR) share price is up 34% in the last year, clearly besting the market return of around 3.1% (not including dividends). So that should have shareholders smiling. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.

View our latest analysis for Okapi Resources

Okapi Resources recorded just AU$23,662 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Okapi Resources will find or develop a valuable new mine 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.

When it last reported its balance sheet in June 2019, Okapi Resources could boast a strong position, with cash in excess of all liabilities of AU$3.1m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And given that the share price has shot up 136% in the last year , its fair to say investors are liking management's vision for the future. You can see in the image below, how Okapi Resources's cash levels have changed over time (click to see the values). You can see in the image below, how Okapi Resources's cash levels have changed over time (click to see the values).

ASX:OKR Historical Debt, October 4th 2019
ASX:OKR Historical Debt, October 4th 2019

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

Okapi Resources boasts a total shareholder return of 34% for the last year. And the share price momentum remains respectable, with a gain of 59% in the last three months. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

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.

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.