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Australian Vanadium Limited (ASX:AVL) shareholders might be concerned after seeing the share price drop 11% in the last quarter. But that doesn't change the fact that the returns over the last five years have been pleasing. It has returned a market beating 70% in that time.
View our latest analysis for Australian Vanadium
We don't think Australian Vanadium's revenue of AU$89,562 is enough to establish significant demand. 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 Australian Vanadium 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 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. Some Australian Vanadium investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.
When it last reported its balance sheet in December 2018, Australian Vanadium had cash in excess of all liabilities of AU$5.4m. While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. Given the share price has increased by a solid 11% per year, over 5 years, its fair to say investors remain excited about the future, despite the potential need for cash. You can click on the image below to see (in greater detail) how Australian Vanadium's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. However you can take a look at whether insiders have been buying up 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'd be remiss not to mention the difference between Australian Vanadium's total shareholder return (TSR) and its share price return. 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. Australian Vanadium hasn't been paying dividends, but its TSR of 76% exceeds its share price return of 70%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.