Did You Manage To Avoid West Red Lake Gold Mines's (CNSX:RLG) Painful 65% Share Price Drop?

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If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term West Red Lake Gold Mines Inc. (CNSX:RLG) shareholders. Sadly for them, the share price is down 65% in that time. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days.

Check out our latest analysis for West Red Lake Gold Mines

West Red Lake Gold Mines 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). This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that West Red Lake Gold Mines 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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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). Some West Red Lake Gold Mines investors have already had a taste of the bitterness stocks like this can leave in the mouth.

West Red Lake Gold Mines had liabilities exceeding cash by CA$619,590 when it last reported in March 2019, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 30% per year, over 3 years, it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how West Red Lake Gold Mines's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

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

It's nice to see that West Red Lake Gold Mines shareholders have gained 6.3% (in total) over the last year. This recent result is much better than the 30% drop suffered by shareholders each year (on average) over the last three. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course West Red Lake Gold Mines 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 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.