Latin Resources Limited (ASX:LRS) shareholders might understandably be very concerned that the share price has dropped 30% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been spectacular. Indeed, the share price is up a whopping 393% in that time. Arguably, the recent fall is to be expected after such a strong rise. But the real question is whether the business fundamentals can improve over the long term.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Latin Resources

We don't think Latin Resources' revenue of AU$1,633,994 is enough to establish significant demand. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Latin Resources will find or develop a valuable new mine before too long.

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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Latin Resources has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

When it last reported its balance sheet in December 2023, Latin Resources had cash in excess of all liabilities of AU$44m. While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. Given the share price has increased by a solid 50% per year, over 5 years , it's fair to say investors remain excited about the future, despite the potential need for cash. You can see in the image below, how Latin Resources' cash levels have changed over time (click to see the values).

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. Given that situation, many of the best investors like to check if insiders have been buying shares. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Latin Resources' total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Latin Resources hasn't been paying dividends, but its TSR of 464% exceeds its share price return of 393%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

It's nice to see that Latin Resources shareholders have received a total shareholder return of 61% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 41% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. To that end, you should be aware of the 4 warning signs we've spotted with Latin Resources .

We will like Latin Resources better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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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.