U.S. Markets closed

Volatility 101: Should Premier Gold Mines (TSE:PG) Shares Have Dropped 43%?

Simply Wall St

As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Premier Gold Mines Limited (TSE:PG) shareholders have had that experience, with the share price dropping 43% in three years, versus a market return of about 15%. The falls have accelerated recently, with the share price down 11% in the last three months.

View our latest analysis for Premier Gold Mines

Premier Gold Mines isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years Premier Gold Mines saw its revenue shrink by 6.1% per year. That's not what investors generally want to see. The stock has disappointed holders over the last three years, falling 17%, annualized. That makes sense given the lack of either profits or revenue growth. However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

TSX:PG Income Statement, October 15th 2019

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Premier Gold Mines

A Different Perspective

While the broader market gained around 4.4% in the last year, Premier Gold Mines shareholders lost 3.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 8.0% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Premier Gold Mines by clicking this link.

There are plenty of other companies that have insiders buying up shares. You probably do 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.

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.