Woomera Mining Limited (ASX:WML) shareholders will doubtless be very grateful to see the share price up 50% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 27% in the last three years, significantly under-performing the market.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
Woomera Mining didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). You have to wonder why venture capitalists aren't funding it. 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 Woomera Mining finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered 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.
Woomera Mining had cash in excess of all liabilities of just AU$1.8m when it last reported (December 2021). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 8% per year, over 3 years. You can click on the image below to see (in greater detail) how Woomera Mining's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. 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've already covered Woomera Mining's share price action, but we should also mention its total shareholder return (TSR). 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. Woomera Mining hasn't been paying dividends, but its TSR of 13% exceeds its share price return of -27%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We're pleased to report that Woomera Mining rewarded shareholders with a total shareholder return of 27% over the last year. That gain actually surpasses the 4% TSR it generated (per year) over three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 instance, we've identified 5 warning signs for Woomera Mining (3 are potentially serious) that you should be aware of.
If you are like me, then you will 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.
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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.