We’re definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Goldgroup Mining Inc. (TSE:GGA) during the five years that saw its share price drop a whopping 87%. We also note that the stock has performed poorly over the last year, with the share price down 43%. Furthermore, it’s down 27% in about a quarter. That’s not much fun for holders.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Goldgroup Mining isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn’t make profits, we’d generally expect to see good revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last half decade, Goldgroup Mining saw its revenue increase by 6.7% per year. That’s a pretty good rate for a long time period. So it is unexpected to see the stock down 33% per year in the last five years. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at Goldgroup Mining’s financial health with this free report on its balance sheet.
A Different Perspective
While the broader market gained around 3.5% in the last year, Goldgroup Mining shareholders lost 43%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 33% per year over five years. 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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 firstname.lastname@example.org. 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.