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Did Changing Sentiment Drive Troilus Gold’s (TSE:TLG) Share Price Down A Worrying 56%?

Simply Wall St

It is doubtless a positive to see that the Troilus Gold Corp. (TSE:TLG) share price has gained some 42% in the last three months. But that’s not enough to compensate for the decline over the last twelve months. Specifically, the stock price slipped by 56% in that time. The share price recovery is not so impressive when you consider the fall. It may be that the fall was an overreaction.

View our latest analysis for Troilus Gold

Troilus Gold didn’t have any revenue in the last year, so it’s fair to say it doesn’t yet have a proven product (or at least not one people are paying for). You have to wonder why venture capitalists aren’t funding it. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Troilus Gold 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. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as Troilus Gold investors might realise.

Troilus Gold had net cash of just CA$3.2m when it last reported (January 2019). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 56% in the last year. You can click on the image below to see (in greater detail) how Troilus Gold’s cash and debt levels have changed over time.

TSX:TLG Historical Debt, March 14th 2019

In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.

A Different Perspective

While Troilus Gold shareholders are down 56% for the year, the market itself is up 3.5%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. It’s great to see a nice little 42% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it’s the start of a new trend. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Troilus Gold by clicking this link.

Troilus Gold is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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.