Did You Manage To Avoid China Gold International Resources' (TSE:CGG) Devastating 80% Share Price Drop?

Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding China Gold International Resources Corp. Ltd. (TSE:CGG) during the five years that saw its share price drop a whopping 80%. And we doubt long term believers are the only worried holders, since the stock price has declined 70% over the last twelve months. Furthermore, it's down 55% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

View our latest analysis for China Gold International Resources

China Gold International Resources isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last half decade, China Gold International Resources saw its revenue increase by 17% per year. That's better than most loss-making companies. So it's not at all clear to us why the share price sunk 28% throughout that time. It could be that the stock was over-hyped before. We'd recommend carefully checking for indications of future growth - and balance sheet threats - before considering a purchase.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think China Gold International Resources will earn in the future (free profit forecasts).

A Different Perspective

While the broader market lost about 8.6% in the twelve months, China Gold International Resources shareholders did even worse, losing 70%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 28% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for China Gold International Resources (1 is a bit concerning) that you should be aware of.

Of course China Gold International Resources 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.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.