The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Glen Eagle Resources Inc. (CVE:GER) shareholders for doubting their decision to hold, with the stock down 26% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 26%.
With just CA$1,713,755 worth of revenue in twelve months, we don't think the market considers Glen Eagle Resources to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Glen Eagle Resources will find or develop a valuable new mine before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
Our data indicates that Glen Eagle Resources had CA$1.7m more in total liabilities than it had cash, when it last reported in June 2019. That puts it in the highest risk category, according to our analysis. But since the share price has dived -5.8% per year, over 5 years , it looks like some investors think it's time to abandon ship, so to speak. The image below shows how Glen Eagle Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how Glen Eagle Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Glen Eagle Resources shareholders are down 26% for the year, but the market itself is up 5.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5.8% 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. If you would like to research Glen Eagle Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course Glen Eagle Resources may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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 email@example.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.