Yahoo Finance Introducing Galileo Exploration (CVE:GXL), The Stock That Tanked 86%
Over the last month the Galileo Exploration Ltd. (CVE:GXL) has been much stronger than before, rebounding by 50%. But that is meagre solace in the face of the shocking decline over three years. In that time the share price has melted like a snowball in the desert, down 86%. 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.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
View our latest analysis for Galileo Exploration
With just CA$32,406 worth of revenue in twelve months, we don't think the market considers Galileo Exploration to have proven its business plan. 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 Galileo Exploration finds some valuable resources, before it runs out of money.
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. It certainly is a dangerous place to invest, as Galileo Exploration investors might realise.
Galileo Exploration had liabilities exceeding cash by CA$674k when it last reported in December 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 48% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed. 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.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
We regret to report that Galileo Exploration shareholders are down 25% for the year. Unfortunately, that's worse than the broader market decline of 16%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9.7% 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. It's always interesting to track share price performance over the longer term. But to understand Galileo Exploration better, we need to consider many other factors. To that end, you should learn about the 5 warning signs we've spotted with Galileo Exploration (including 4 which is can't be ignored) .
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.
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.
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