While not a mind-blowing move, it is good to see that the Goldquest Mining Corp. (CVE:GQC) share price has gained 15% in the last three months. But don’t envy holders — looking back over 5 years the returns have been really bad. In fact, the share price has declined rather badly, down some 68% in that time. Some might say the recent bounce is to be expected after such a bad drop. Of course, this could be the start of a turnaround.
Check out our latest analysis for Goldquest Mining
Goldquest Mining hasn’t yet reported any revenue yet, so it’s as much a business idea as a business. This state of affairs suggests that venture capitalists won’t provide funds on attractive terms. As a result, we think it’s unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that Goldquest Mining will find or develop a valuable new mine before too long.
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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Goldquest Mining has already given some investors a taste of the bitter losses that high risk investing can cause.
Goldquest Mining has plenty of cash in the bank, with net cash sitting at CA$18m, when it last reported (September 2018). That allows management to focus on growing the business, and not worry too much about raising capital. But with the share price diving 20% per year, over 5 years, it could be that the price was previously too hyped up. The image belows shows how Goldquest Mining’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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I’d like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
A Different Perspective
Investors in Goldquest Mining had a tough year, with a total loss of 52%, against a market gain of about 3.5%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 20% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you would like to research Goldquest Mining in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course Goldquest 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 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.