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Did Changing Sentiment Drive Gespeg Copper Resources's (CVE:GCR) Share Price Down A Painful 71%?

Simply Wall St

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Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Gespeg Copper Resources Inc. (CVE:GCR) for half a decade as the share price tanked 71%. And it's not just long term holders hurting, because the stock is down 33% in the last year. The falls have accelerated recently, with the share price down 33% in the last three months.

Check out our latest analysis for Gespeg Copper Resources

Gespeg Copper Resources hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Gespeg Copper Resources 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. 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 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). It certainly is a dangerous place to invest, as Gespeg Copper Resources investors might realise.

Our data indicates that Gespeg Copper Resources had CA$512,428 more in total liabilities than it had cash, when it last reported in January 2019. That makes it extremely high risk, in our view. But since the share price has dived -22% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Gespeg Copper Resources's cash levels have changed over time.

TSXV:GCR Historical Debt, June 10th 2019

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. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

A Different Perspective

We regret to report that Gespeg Copper Resources shareholders are down 33% for the year. Unfortunately, that's worse than the broader market decline of 0.8%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 22% per year over five years. We realise that Buffett 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 businesses. If you would like to research Gespeg Copper Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

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.