Arafura Resources (ASX: ARU) share price rose 107% and shareholders are proud of it

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<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "When you buy shares in a company, there are there is always a risk that the price will drop to zero, but if you choose a company that is really thriving, you can do more than 100%. For example the Arafura Resources Limited (ASX: ARU) The share price rose by 107% in just one year. The share price is now 1.1% higher than a week ago. In the longer term, however, the stock did not perform as well, as the stock only increased by 22% in three years. "Data-reactid =" 27 "> When you buy shares in a company, there is always a risk that the price will drop to zero, but if you choose a company that really thrives, you can do more than 100%. For example the Arafura Resources Limited (ASX: ARU) The share price rose by 107% in just one year. The share price is now 1.1% higher than a week ago. In the long term, however, the stock did not perform as well, as it only increased by 22% in three years.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = " Check out our latest analysis for Arafura Resources "data-reactid =" 28 "> Check out our latest analysis for Arafura Resources

We do not believe Arafura Resources' sales of AU $ 127,232 are sufficient to generate significant demand. So it seems investors have focused more on what might be than paying attention to current earnings (or lack thereof). It is likely that some shareholders believe that Arafura Resources will soon find or develop a valuable new mine.

We think that companies that have no significant income or profit have a fairly high risk. You should be aware that there is always a chance that this type of company will have to spend more shares to raise money to continue pursuing their business plan. While some companies like this continue to implement their plan and make good money for shareholders, many end up in painful losses and eventual listing. Arafura Resources has already given some investors a taste of the positive effects that a high-risk investment can have if your timing is right.

When Arafura Resources reported in June 2019, it had a minimum amount of cash that exceeded all liabilities. So if it hasn't tried to replenish the reserves yet, we think the short-term chances of a fundraising event are pretty high. It is a testament to the popularity of the business plan that despite the weak balance sheet, its share price rose 97% last year. Click on the image below to see how Arafura Resources' cash holdings have changed over time. The following image shows how Arafura Resources' balance sheet has changed over time. If you want to see the exact values, just click on the image.

ASX: ARU Historical Debt, January 4, 2020

<p class = "canvas-atom canvas-text MB (1.0em) MB (0) – SM MB (0.8em) – SM" type = "text" content = "It can be extremely risky to invest in a company doesn’t even have sales. There’s no easy way to determine its value. Given this situation, many of the best investors like to check if insiders have bought stocks. If so, it’s often positive, provided the purchase is sustainable and Fortunately, we are able to provide you with this free Diagram of insider buying (and selling)."data-reactid =" 44 "> It can be extremely risky to invest in a company that doesn't even have any revenue. It is not easy to determine its value. Given this situation, many of the best investors are happy to check for insiders It is often positive if this is the case, provided the purchase is sustainable and sensible, luckily we are able to provide you with this free Diagram of insider buying (and selling).

What about total shareholder return (TSR)?

Investors should note that there is a difference between Arafura Resources Total Shareholder Return (TSR) and the change in share price described above. The TSR tries to record the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital increases offered to shareholders. Arafura Resources has not paid dividends, but its 122% TSR exceeds its 107% return on equity, meaning that it has either spun off a business or raised capital at a discount. This offers shareholders additional added value.

Another perspective

<p class = "Canvas-Atom Canvas-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "It is nice to see that the shareholders of Arafura Resources Received the text This is better than the annualized return of 13% in half a decade, which means the company has been doing better lately, and someone with an optimistic outlook could see the recent improvement in TSR as an indication of the business itself gets better over time, so if you want to take a closer look at Arafura Resources, you might want to See if insiders bought or sold shares in the company."data-reactid =" 48 "> It's nice to see that Arafura Resources shareholders had a total return of 122% last year, better than the annualized return of 13% in half a decade, which means that the company is someone with an optimistic outlook may see the recent improvement in TSR as an indication that the business itself is getting better over time Insider trades shares in the company bought or sold.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Of course Arafura Resources may not be the best stock to buy, Maybe you want to see that free Collection of growth stocks."data-reactid =" 53 "> Of course Arafura Resources may not be the best stock to buy, Maybe you want to see that free Collection of growth stocks.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Please note that the market returns mentioned in this article reflect the market-weighted average returns on the shares currently traded on the AU stock exchanges."data-reactid =" 54 ">Please note that the market returns mentioned in this article reflect the market-weighted average returns on the shares currently traded on the AU stock exchanges.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "If you discover an error that justifies a correction, please contact the editorial team at editorial-team@simplywallst.com, This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We strive to provide you with long-term, focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Thank you for reading."data-reactid =" 55 ">If you discover an error that justifies a correction, please contact the editorial team at editorial-team@simplywallst.com. This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We strive to provide you with long-term, focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Thank you for reading.