It is a pleasure to report that the GobiMin Inc. (CVE:GMN) is up 34% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 49% in the last three years, falling well short of the market return.
Because GobiMin made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years GobiMin saw its revenue shrink by 80% per year. That’s definitely a weaker result than most pre-profit companies report. With revenue in decline, the share price decline of 20% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling GobiMin stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, GobiMin’s TSR for the last 3 years was -46%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We’re pleased to report that GobiMin shareholders have received a total shareholder return of 17% over one year. That’s including the dividend. That certainly beats the loss of about 7.3% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Like risks, for instance. Every company has them, and we’ve spotted 4 warning signs for GobiMin (of which 2 make us uncomfortable!) you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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