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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the BMG Resources Limited (ASX:BMG) share price is up 75% in the last year, clearly besting than the market return of around 6.3% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Looking back further, the stock price is 40% higher than it was three years ago.
Check out our latest analysis for BMG Resources
With just AU$15,746 worth of revenue in twelve months, we don't think the market considers BMG Resources to have proven its business plan. 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. It seems likely some shareholders believe that BMG Resources 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. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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. Of course, if you time it right, high risk investments like this can really pay off, as BMG Resources investors might know.
When it last reported its balance sheet in December 2018, BMG Resources could boast a strong position, with cash in excess of all liabilities of AU$1.4m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And given that the share price has shot up 75% in the last year, its fair to say investors are liking management's vision for the future. You can see in the image below, how BMG Resources's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how BMG Resources's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.