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The last three months have been tough on Argo Gold Inc. (CNSX:ARQ) shareholders, who have seen the share price decline a rather worrying 68%. But that doesn't change the fact that the returns over the last three years have been pleasing. After all, the share price is up a market-beating 90% in that time.
View our latest analysis for Argo Gold
Argo Gold didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). 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 Argo Gold 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. 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. Argo Gold has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Argo Gold had liabilities exceeding cash by CA$189,497 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. So we're surprised to see the stock up 24% per year, over 3 years, but we're happy for holders. It's clear more than a few people believe in the potential. The image below shows how Argo Gold'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. Given that situation, many of the best investors like to check if insiders have been buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
The last twelve months weren't great for Argo Gold shares, which cost holders 5.0%, while the market was up about 2.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 24% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. If you would like to research Argo Gold in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.