Yahoo Finance Easy Come, Easy Go: How Columbus Gold (TSE:CGT) Shareholders Got Unlucky And Saw 76% Of Their Cash Evaporate
While it may not be enough for some shareholders, we think it is good to see the Columbus Gold Corp. (TSE:CGT) share price up 12% in a single quarter. But the last three years have seen a terrible decline. Indeed, the share price is down a whopping 76% in the last three years. Arguably, the recent bounce is to be expected after such a bad drop. But the more important question is whether the underlying business can justify a higher price still.
View our latest analysis for Columbus Gold
Columbus Gold hasn't yet reported any revenue, so it's as much a business idea as an actual business. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Columbus Gold finds some valuable resources, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Columbus Gold has already given some investors a taste of the bitter losses that high risk investing can cause.
Columbus Gold had cash in excess of all liabilities of CA$2.6m when it last reported (March 2019). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 38% per year, over 3 years, it seems likely that the need for cash is weighing on investors' minds. You can see in the image below, how Columbus Gold's cash levels have changed over time (click to see the values). The image below shows how Columbus Gold's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Columbus Gold's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Columbus Gold's TSR, at -71% is higher than its share price return of -76%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
While the broader market gained around 1.7% in the last year, Columbus Gold shareholders lost 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of Columbus Gold's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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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.
