Yahoo Finance The Kina Petroleum (ASX:KPE) Share Price Gained 2385% And Shareholders Are Jubilant
We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. You won't get it right every time, but when you do, the returns can be truly splendid. One such superstar is Kina Petroleum Corporation (ASX:KPE), which saw its share price soar 2385% in three years. And shareholders are doubtless smiling after an even more impressive share price rise of 3938% in thirty days.
We love happy stories like this one. The company should be really proud of that performance!
See our latest analysis for Kina Petroleum
With just US$5,367 worth of revenue in twelve months, we don't think the market considers Kina Petroleum to have proven its business plan. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Kina Petroleum finds fossil fuels with an exploration program, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. The is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Some Kina Petroleum investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital
Kina Petroleum had net cash of US$4.9m when it last reported (December 2018). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price up 192% per year, over 3 years, the market is seems hopeful about the potential, despite the cash burn. You can click on the image below to see (in greater detail) how Kina Petroleum's cash and debt levels have changed over time.
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 usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
We're pleased to report that Kina Petroleum shareholders have received a total shareholder return of 2175% over one year. That gain is better than the annual TSR over five years, which is 32%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. You could get a better understanding of Kina Petroleum's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.