Did You Miss Desert Gold Ventures's (CVE:DAU) 91% Share Price Gain?
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By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Desert Gold Ventures Inc. (CVE:DAU), which is up 91%, over three years, soundly beating the market return of 14% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 11%.
View our latest analysis for Desert Gold Ventures
Desert Gold Ventures 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). So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Desert Gold Ventures finds some valuable resources, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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. Some Desert Gold Ventures 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.
Desert Gold Ventures had net debt of US$389,276 when it last reported in September 2018, according to our data. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 24% per year, over 3 years, but we're happy for holders. Investors must really like its potential. The image below shows how Desert Gold Ventures'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, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.
A Different Perspective
It's good to see that Desert Gold Ventures has rewarded shareholders with a total shareholder return of 11% in the last twelve months. That certainly beats the loss of about 21% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. If you would like to research Desert Gold Ventures 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 are like me, then you will not want to miss this free list of growing companies that insiders are 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.
