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It might be of some concern to shareholders to see the Radius Gold Inc. (CVE:RDU) share price down 22% in the last month. But that doesn’t change the fact that the returns over the last year have been very strong. Indeed, the share price is up an impressive 130% in that time. So we think most shareholders won’t be too upset about the recent fall. The real question is whether the business is trending in the right direction.
See our latest analysis for Radius Gold
With zero revenue generated over twelve months, we don’t think that Radius Gold has proved its business plan yet. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Radius Gold finds some valuable resources, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. 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 Radius Gold investors might know.
When it last reported its balance sheet in March 2019, Radius Gold could boast a strong position, with cash in excess of all liabilities of CA$4.7m. That allows management to focus on growing the business, and not worry too much about raising capital. And given that the share price has shot up 130% in the last year, its fair to say investors are liking management’s vision for the future. You can see in the image below, how Radius Gold’s cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. One thing you can do is check if company insiders are buying shares. It’s often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
It’s nice to see that Radius Gold shareholders have received a total shareholder return of 130% over the last year. That gain is better than the annual TSR over five years, which is 17%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can 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.
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.