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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Gold Road Resources Limited (ASX:GOR) share price has soared 254% in the last half decade. Most would be very happy with that. Unfortunately, though, the stock has dropped 5.7% over a week. But note that the broader market is down 0.4% since last week, and this may have impacted Gold Road Resources's share price.
View our latest analysis for Gold Road Resources
Gold Road Resources recorded just AU$204,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Gold Road Resources 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 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Gold Road Resources investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.
Gold Road Resources had liabilities exceeding cash by AU$112,238,000 when it last reported in December 2018, according to our data. That puts it in the highest risk category, according to our analysis. So the fact that the stock is up 29% per year, over 5 years shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. The image below shows how Gold Road Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how Gold Road Resources'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. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.