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Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Go Cobalt Mining Corp. (CNSX:GOCO) share price is down 11% in the last year. That’s disappointing when you consider the market returned 2.6%. Go Cobalt Mining hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. The share price has dropped 29% in three months.
Go Cobalt Mining didn’t have any revenue in the last year, so it’s fair to say it doesn’t yet have a proven product (or at least not one people are paying for). You have to wonder why venture capitalists aren’t funding it. 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 Go Cobalt Mining 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).
Go Cobalt Mining had cash in excess of all liabilities of just CA$853k when it last reported (January 2019). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 11% in the last year. You can see in the image below, how Go Cobalt Mining’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. Would it bother you if insiders were selling the stock? It would bother me, that’s for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While Go Cobalt Mining shareholders are down 11% for the year, the market itself is up 2.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Notably, the loss over the last year isn’t as bad as the 29% drop in the last three months. So it seems like some holders have been dumping the stock of late – and that’s not bullish. Before spending more time on Go Cobalt Mining it might be wise to click here to see if insiders have been buying or selling shares.
Of course Go Cobalt Mining may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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 firstname.lastname@example.org. 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.