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For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Zeus Resources Limited (ASX:ZEU), since the last five years saw the share price fall 22%. In the last ninety days we've seen the share price slide 22%.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Zeus Resources
Zeus Resources recorded just AU$27,228 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Zeus Resources finds fossil fuels with an exploration program, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. We can see that they needed to raise more capital, and took that step recently despite the fact that it would have been dilutive 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.
Zeus Resources had cash in excess of all liabilities of when it last reported. That's not too bad but management decided to raise capital in any case to shore up the balance sheet since the company is not yet breaking even. With the share price down 4% per year, over 5 years , it seems likely that the additional cash is not out-weighing other issues on investors' minds. The image below shows how Zeus Resources' balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Zeus Resources' total shareholder return (TSR) and its share price change, which we've covered above. 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. We note that Zeus Resources' TSR, at 40% is higher than its share price return of -22%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.