Unless you borrow money to invest, the potential losses are limited. But when you pick a company that is really flourishing, you can make more than 100%. Take, for example Smart Marine Systems Limited (ASX:SM8). Its share price is already up an impressive 233% in the last twelve months. On top of that, the share price is up 122% in about a quarter. Unfortunately the longer term returns are not so good, with the stock falling 61% in the last three years.

See our latest analysis for Smart Marine Systems

We don't think Smart Marine Systems's revenue of AU$11,747 is enough to establish significant demand. 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. Investors will be hoping that Smart Marine Systems can make progress and gain better traction for the business, before it runs low on cash.

We think companies that have neither significant revenues nor profits are pretty 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. Smart Marine Systems has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

Smart Marine Systems had cash in excess of all liabilities of AU$1.7m when it last reported (June 2019). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price up 68% in the last year , the market is seems hopeful about the potential, despite the cash burn. You can see in the image below, how Smart Marine Systems's cash levels have changed over time (click to see the values). You can see in the image below, how Smart Marine Systems's cash levels have changed over time (click to see the values).

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 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).

What about the Total Shareholder Return (TSR)?

We've already covered Smart Marine Systems'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. Smart Marine Systems hasn't been paying dividends, but its TSR of 249% exceeds its share price return of 233%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.