Introducing EnviroLeach Technologies (CSE:ETI), A Stock That Climbed 22% In The Last Three Years
June 15, 2020
By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at EnviroLeach Technologies Inc. (CSE:ETI), which is up 22%, over three years, soundly beating the market decline of 7.8% (not including dividends).
See our latest analysis for EnviroLeach Technologies
EnviroLeach Technologies recorded just CA$453,389 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that EnviroLeach Technologies finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
EnviroLeach Technologies had liabilities exceeding cash by CA$448k when it last reported in March 2020, according to our data. That makes it extremely high risk, in our view. So the fact that the stock is up 147% per year, over 3 years shows that high risks can lead to high rewards, sometimes. It’s clear more than a few people believe in the potential. You can see in the image below, how EnviroLeach Technologies’s cash levels have changed over time (click to see the values).
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. You can click here to see if there are insiders buying.
A Different Perspective
The last twelve months weren’t great for EnviroLeach Technologies shares, which performed worse than the market, costing holders 19%. The market shed around 9.0%, no doubt weighing on the stock price. Investors are up over three years, booking 6.8% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it’s turns out to be an opportunity, but you really need to be sure that the quality is there. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we’ve identified 6 warning signs for EnviroLeach Technologies (3 are a bit unpleasant) that you should be aware of.
EnviroLeach Technologies is not the only stock that insiders are buying. For those who like to find winning https://simplywall.st/stocks/ca/materials/cse-eti/enviroleach-technologies-shares/news/introducing-enviroleach-technologies-cseeti-a-stock-that-climbed-22-in-the-last-three-years/