Lepidico Limited (ASX: LPD) Shareholders could be worried after seeing the stock price drop 18% last week. But that’s not a problem when you consider the soaring share price over the past year. Indeed, the share price rose by 311% during this period. So we wouldn’t blame the sellers for taking a profit. Of course, winners often keep winning, so there may be more wins to come (if business fundamentals stack up).
While the stock has fallen 18% this week, it’s worth focusing on the long term and seeing if historical stock returns have been driven by underlying fundamentals.
See our latest review for Lepidico
With only AU $ 4,084,027 in sales in twelve months, we don’t think the market considers Lepidico to have proven its business plan. As a result, we believe shareholders are unlikely to pay much attention to current earnings, but instead speculate on growth in the years to come. It seems likely that some shareholders believe that Lepidico will find or develop a new mine of value before too long.
We believe that companies that do not have significant revenues or profits present a fairly high risk. There is usually a good chance that they will need more money for the development of their business, putting them at the mercy of the capital markets to raise capital. So the price of the stock itself has an impact on the value of the stock (because it determines the cost of capital). While some of these companies are doing very well in the long run, others are put forward by developers before they fall back to earth and go bankrupt (or be recapitalized). Some Lepidico investors have already had a taste of sweet tasting stocks like this one can leave in their mouths as they gain popularity and attract speculative capital.
Lepidico has a lot of money in the bank, with excess cash on all liabilities amounting to A $ 4.3 million, when it was last reported (June 2021). This allows management to focus on growing the business and not worry too much about raising capital. And given that the stock price has climbed 58% in the past year, it’s fair to say that investors like management’s vision for the future. You can click on the image below to see (in more detail) how Lepidico’s cash levels have changed over time.
It can be extremely risky to invest in a business that doesn’t even have an income. There is no way to know its value easily. However, you can check to see if any insiders have bought any stocks. This is often positive if so, assuming the purchase is sustained and meaningful. Fortunately, we are able to provide you with this free insider buying (and selling) chart.
A different perspective
It is nice to see that Lepidico shareholders have received a total shareholder return of 311% over the past year. This is better than the 28% annualized return over half a decade, which implies that the company has been doing better recently. Since stock price dynamics remain strong, it might be worth taking a closer look at the stock lest you miss an opportunity. It is always interesting to follow the evolution of stock prices over the long term. But to better understand Lepidico, there are many other factors that we need to consider. For example, we discovered 3 warning signs for Lepidico which you should know before investing here.
If you like to buy stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on AU stock exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.