What’s going on with the Helium One share price?

The Helium One share price has charged higher this year, but this Fool won’t be buying the stock until further progress is made.

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The Helium One (LSE: HE1) share price has performed fantastically over the past year. The stock has increased in value by nearly 530% over the past 12 months. Year-to-date, the shares are up around 230%.

However, despite this performance, the company is still in its early stages of development. 

Helium One share price outlook

Helium One’s goal is to explore, develop, and ultimately become a high-grade helium producer for the international market.

So far, the enterprise has only reached the exploration stage. It’s currently drilling at its maiden exploration well at the Rukwa project in Tanzania. It’s made some progress here. Management recently reported it has identified the presence of helium in drilling mud from a very shallow depth.

Unfortunately, the concentration of gas found wasn’t enough to be commercially viable. However, according to a press release issued on 21 June, there’s still 1,000m left to drill before real analysis can start.

There’s been some speculation the company is sitting on one of the world’s most extensive helium resources. This seems to be the reason behind the Helium One share price performance over the past 12 months.

Initial indications are positive, but there’s still a considerable amount of work to do, and the company is only at the exploration stage.

Even if it finds commercially viable amounts of the resource, it will still face a long battle to get the project up and running and producing cash flow. As a result, it could be years before the company sees any return on its exploration investment.

Investors rush to buy 

At the time of writing, the Helium One share price has a market capitalisation of £164m. This could be high if the business isn’t sitting on a world-beating helium resource. But, on the other hand, it could undervalue the enterprise if it is sitting on a world-beating helium resource.

At this stage, it’s too early to tell. The Helium One share price is an entirely speculative investment today. However, I can’t deny the business has potential.

Looking at the company’s own projections, it seems to me that if the enterprise is can become one of the world’s largest helium producers, the Helium One share price is incredibly undervalued. It would appear that the market agrees.

As such, I believe the value of Helium One could continue to increase as and when positive updates emerge. If the company announces additional positive drilling updates over the next few months, I think the stock could continue to increase in value. Still, if the company doesn’t live up to expectations, the value of the stock could fall as the market reevaluates its potential.

Therefore, considering the speculative nature of the Helium One share price, I wouldn’t buy the stock today. I’d much rather wait and see how the company’s drilling results develop over the next few months and years. This will allow me to better understand how the business will evolve as we advance, although it may mean I miss out on some profits along the way.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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