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Such Is Life: How Galileo Exploration (CVE:GXL) Shareholders Saw Their Shares Drop 67%

Simply Wall St

While not a mind-blowing move, it is good to see that the Galileo Exploration Ltd. (CVE:GXL) share price has gained 25% in the last three months. But that is little comfort to those holding over the last half decade, sitting on a big loss. In fact, the share price has declined rather badly, down some 67% in that time. So we're not so sure if the recent bounce should be celebrated. But it could be that the fall was overdone.

See our latest analysis for Galileo Exploration

We don't think Galileo Exploration's revenue of CA$27,925 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. For example, investors may be hoping that Galileo Exploration finds some valuable resources, before it runs out of money.

Companies that lack both meaningful revenue and profits are usually considered 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 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 Galileo Exploration investors have already had a taste of the bitterness stocks like this can leave in the mouth.

Galileo Exploration had liabilities exceeding cash by CA$281,518 when it last reported in March 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -20% 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 Galileo Exploration's cash levels have changed over time. The image below shows how Galileo Exploration's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

TSXV:GXL Historical Debt, July 30th 2019

Of course, the truth is that it is hard to value companies without much revenue or profit. 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

Galileo Exploration shareholders are down 17% for the year, but the market itself is up 1.1%. 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. However, the loss over the last year isn't as bad as the 20% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You could get a better understanding of Galileo Exploration's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

We will like Galileo Exploration 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.

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 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. Thank you for reading.