It's not possible to invest over long periods without making some bad investments. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of China Gold International Resources Corp. Ltd. (TSE:CGG); the share price is down a whopping 84% in the last three years. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 75% in a year. The falls have accelerated recently, with the share price down 58% in the last three months. But this could be related to the weak market, which is down 31% in the same period.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
China Gold International Resources isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over three years, China Gold International Resources grew revenue at 26% per year. That's well above most other pre-profit companies. So on the face of it we're really surprised to see the share price down 45% a year in the same time period. The share price makes us wonder if there is an issue with profitability. Ultimately, revenue growth doesn't amount to much if the business can't scale well. If the company is low on cash, it may have to raise capital soon.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We regret to report that China Gold International Resources shareholders are down 75% for the year. Unfortunately, that's worse than the broader market decline of 28%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 21% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for China Gold International Resources (1 shouldn't be ignored!) that you should be aware of before investing here.
We will like China Gold International Resources 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 CA exchanges.
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