Investors in Tanzanian Gold (TSE:TNX) have unfortunately lost 66% over the last three years
The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Tanzanian Gold Corporation (TSE:TNX) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 66% share price collapse, in that time. The more recent news is of little comfort, with the share price down 41% in a year. Furthermore, it's down 26% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Tanzanian Gold
We don't think Tanzanian Gold's revenue of US$3,334,000 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. 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 Tanzanian Gold finds some valuable resources, before it runs out of money.
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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Tanzanian Gold has already given some investors a taste of the bitter losses that high risk investing can cause.
Tanzanian Gold had liabilities exceeding cash by US$332k when it last reported in February 2022, according to our data. That puts it in the highest risk category, according to our analysis. But since the share price has dived 30% per year, over 3 years , it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Tanzanian Gold's cash levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. What if insiders are ditching the stock hand over fist? 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
Investors in Tanzanian Gold had a tough year, with a total loss of 41%, against a market gain of about 18%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 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. It's always interesting to track share price performance over the longer term. But to understand Tanzanian Gold better, we need to consider many other factors. For example, we've discovered 6 warning signs for Tanzanian Gold (1 is concerning!) that you should be aware of before investing here.
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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
