Breaker Resources NL (ASX:BRB) shareholders have seen the share price descend 14% over the month. But that scarcely detracts from the really solid long term returns generated by the company over five years. It's fair to say most would be happy with 241% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.

See our latest analysis for Breaker Resources

Breaker Resources 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). As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. For example, investors may be hoping that Breaker Resources 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. The 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 do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Of course, if you time it right, high risk investments like this can really pay off, as Breaker Resources investors might know.

When it reported in December 2018 Breaker Resources had minimal net cash consider its expenditure: just AU$6.1m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. It's a testament to the popularity of the business plan that the share price gained 28% per year, over 5 years, despite the weak balance sheet. The image below shows how Breaker Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

Of course, the truth is that it is hard to value companies without much revenue or profit. One thing you can do is check if company insiders are buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.

What about the Total Shareholder Return (TSR)?

We've already covered Breaker Resources's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Breaker Resources hasn't been paying dividends, but its TSR of 270% exceeds its share price return of 241%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.