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The KalNorth Gold Mines (ASX:KGM) Share Price Is Down 79% So Some Shareholders Are Rather Upset

Simply Wall St

Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. Imagine if you held KalNorth Gold Mines Limited (ASX:KGM) for half a decade as the share price tanked 79%.

Check out our latest analysis for KalNorth Gold Mines

KalNorth Gold Mines recorded just AU$14,404 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 KalNorth Gold Mines finds some valuable resources, before it runs out of money.

Companies that lack both meaningful revenue and profits are usually considered 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 to raise equity. 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 KalNorth Gold Mines investors have already had a taste of the bitterness stocks like this can leave in the mouth.

KalNorth Gold Mines had liabilities exceeding cash by AU$1.8m when it last reported in December 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -27% per year, over 5 years , it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how KalNorth Gold Mines's cash levels have changed over time.

ASX:KGM Historical Debt March 26th 2020

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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? It would bother me, that's for sure. You can click here to see if there are insiders selling.

A Different Perspective

We regret to report that KalNorth Gold Mines shareholders are down 20% for the year. Unfortunately, that's worse than the broader market decline of 17%. 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. However, the loss over the last year isn't as bad as the 27% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand KalNorth Gold Mines better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for KalNorth Gold Mines (of which 4 can't be ignored!) you should know about.

Of course KalNorth Gold Mines 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 AU exchanges.

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.

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. Thank you for reading.