For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Energy Fuels Inc. (TSE:EFR) share price has soared 345% over five years. This just goes to show the value creation that some businesses can achieve. In more good news, the share price has risen 30% in thirty days.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Energy Fuels

With just US$1,679,000 worth of revenue in twelve months, we don't think the market considers Energy Fuels to have proven its business plan. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Energy Fuels 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. There is almost always a chance they will need to raise more capital, and their progress – and share price – will dictate how dilutive that is to current holders. 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). Of course, if you time it right, high risk investments like this can really pay off, as Energy Fuels investors might know.

Energy Fuels had cash in excess of all liabilities of US$53m when it last reported (June 2021). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price up 54% per year, over 5 years , the market is seems hopeful about the potential, despite the cash burn. The image below shows how Energy Fuels' 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, many of the best investors like to check if insiders have been buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.

A Different Perspective

We're pleased to report that Energy Fuels shareholders have received a total shareholder return of 287% over one year. That's better than the annualised return of 35% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example – Energy Fuels has 4 warning signs we think you should be aware of.

Energy Fuels is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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