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Did Business Growth Power Global Hemp Group's (CNSX:GHG) Share Price Gain of 267%?

Simply Wall St

Some Global Hemp Group Inc. (CNSX:GHG) shareholders are probably rather concerned to see the share price fall 31% over the last three months. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In fact, the share price is up a full 267% compared to three years ago. So the recent fall in the share price should be viewed in that context. If the business can perform well for years to come, then the recent drop could be an opportunity.

Check out our latest analysis for Global Hemp Group

Global Hemp Group recorded just CA$1,381 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Global Hemp Group will significantly advance the business plan before too long.

We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Global Hemp Group investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

When it reported in March 2019 Global Hemp Group had minimal cash in excess of all liabilities consider its expenditure: just CA$296k to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. Given how low on cash the it got, investors must really like its potential for the share price to be up 54% per year, over 3 years. You can click on the image below to see (in greater detail) how Global Hemp Group's cash levels have changed over time. The image below shows how Global Hemp Group's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

CNSX:GHG Historical Debt, July 26th 2019

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. However you can take a look at whether insiders have been buying up shares. It's usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

Global Hemp Group shareholders are down 58% for the year, but the broader market is up 0.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Investors are up over three years, booking 54% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. Before spending more time on Global Hemp Group it might be wise to click here to see if insiders have been buying or selling shares.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.