Over the last month the Clean Commodities Corp. (CVE:CLE) has been much stronger than before, rebounding by 60%. But that doesn't change the fact that the returns over the last three years have been disappointing. Indeed, the share price is down a tragic 62% in the last three years. So the improvement may be a real relief to some. While many would remain nervous, there could be further gains if the business can put its best foot forward.
Clean Commodities 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). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Clean Commodities finds some valuable resources, before it runs out of money.
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 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Some Clean Commodities investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it last reported its balance sheet in March 2019, Clean Commodities could boast a strong position, with cash in excess of all liabilities of CA$1.6m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 28% per year, over 3 years, it seems like the market might have been over-excited previously. You can see in the image below, how Clean Commodities's cash levels have changed over time (click to see the values). You can see in the image below, how Clean Commodities'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. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
It's nice to see that Clean Commodities shareholders have received a total shareholder return of 5.3% over the last year. There's no doubt those recent returns are much better than the TSR loss of 7.8% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before spending more time on Clean Commodities it might be wise to click here to see if insiders have been buying or selling shares.
We will like Clean Commodities 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 CA exchanges.
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