Yahoo Finance Introducing Pacton Gold (CVE:PAC), The Stock That Tanked 86%
It's not a secret that every investor will make bad investments, from time to time. But it's not unreasonable to try to avoid truly shocking capital losses. So we hope that those who held Pacton Gold Inc. (CVE:PAC) during the last year don't lose the lesson, in addition to the 86% hit to the value of their shares. That'd be a striking reminder about the importance of diversification. At least the damage isn't so bad if you look at the last three years, since the stock is down 7.1% in that time. The falls have accelerated recently, with the share price down 52% in the last three months.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
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See our latest analysis for Pacton Gold
Pacton 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). This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Pacton Gold 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 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). It certainly is a dangerous place to invest, as Pacton Gold investors might realise.
When it reported in February 2019 Pacton Gold had minimal cash in excess of all liabilities consider its expenditure: just CA$946k to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 86% in the last year. You can see in the image below, how Pacton Gold's cash levels have changed over time (click to see the values).
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 costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Investors in Pacton Gold had a tough year, with a total loss of 86%, against a market gain of about 1.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 29% per year over five years. 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. If you would like to research Pacton Gold in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Pacton Gold may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
