Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Patagonia Gold plc (LON:PGD) for five years would be nursing their metaphorical wounds since the share price dropped 95% in that time. And it’s not just long term holders hurting, because the stock is down 61% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 54% in thirty days.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Patagonia Gold isn’t a profitable company, so it is unlikely we’ll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over five years, Patagonia Gold grew its revenue at 14% per year. That’s a fairly respectable growth rate. So the stock price fall of 46% per year seems pretty steep. The market can be a harsh master when your company is losing money and revenue growth disappoints.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
If you are thinking of buying or selling Patagonia Gold stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 1.0% in the last year, Patagonia Gold shareholders lost 61%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 46% over the last half decade. 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. You could get a better understanding of Patagonia Gold’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
We will like Patagonia Gold better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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 email@example.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.