Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
The truth is that if you invest for long enough, you’re going to end up with some losing stocks. But the last three years have been particularly tough on longer term Paramount Gold Nevada Corp. (NYSEMKT:PZG) shareholders. So they might be feeling emotional about the 54% share price collapse, in that time. And the ride hasn’t got any smoother in recent times over the last year, with the price 43% lower in that time. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days.
With zero revenue generated over twelve months, we don’t think that Paramount Gold Nevada has proved its business plan yet. 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. It seems likely some shareholders believe that Paramount Gold Nevada will find or develop a valuable new mine before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress – and share price – will dictate how dilutive that is to current holders. 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 Paramount Gold Nevada investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Our data indicates that Paramount Gold Nevada had US$1,099,807 more in total liabilities than it had cash, when it last reported in March 2019. That puts it in the highest risk category, according to our analysis. But since the share price has dived -23% per year, over 3 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 Paramount Gold Nevada’s cash levels have changed over time.
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? It would bother me, that’s for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Over the last year, Paramount Gold Nevada shareholders took a loss of 43%. In contrast the market gained about 3.1%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 23% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to ‘buy when there is blood on the streets’, he also focusses on high quality stocks with solid prospects. 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 Paramount Gold Nevada by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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 email@example.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.
The easiest way to discover new investment ideas
Save hours of research when discovering your next investment with Simply Wall St. Looking for companies potentially undervalued based on their future cash flows? Or maybe you’re looking for sustainable dividend payers or high growth potential stocks. Customise your search to easily find new investment opportunities that match your investment goals. And the best thing about it? It’s FREE. Click here to learn more.