Koonenberry Gold Limited (ASX:KNB) shareholders should be happy to see the share price up 10% in the last month. But that doesn’t change the fact that the returns over the last year have been less than pleasing. In fact, the price has declined 61% in a year, falling short of the returns you could get by investing in an index fund.
Since Koonenberry Gold has shed AU$826k from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.
Check out our latest analysis for Koonenberry Gold
Koonenberry Gold recorded just AU$69,974 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won’t provide funds on attractive terms. 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. For example, investors may be hoping that Koonenberry 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. You should be aware that the company needed to issue more shares recently so that it could raise enough money to continue pursuing its business plan. 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). Koonenberry Gold has already given some investors a taste of the bitter losses that high risk investing can cause.
Koonenberry Gold only just had cash in excess of all liabilities when it last reported. So it’s prudent that the management team has already moved to replenish reserves through the recent capital raising event. With that in mind, you can imagine there may be other factors that caused the share price to drop 61% in the last year. You can see in the image below, how Koonenberry Gold’s cash levels have changed over time (click to see the values).
In reality it’s hard to have much certainty when valuing a business that has neither 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 only takes a moment for you to check whether we have identified any insider sales recently.
What About The Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Koonenberry Gold’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Koonenberry Gold hasn’t been paying dividends, but its TSR of -48% exceeds its share price return of -61%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Given that the market gained 17% in the last year, Koonenberry Gold shareholders might be miffed that they lost 48%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. Notably, the loss over the last year isn’t as bad as the 54% drop in the last three months. This probably signals that the business has recently disappointed shareholders – it will take time to win them back. It’s always interesting to track share price performance over the longer term. But to understand Koonenberry Gold better, we need to consider many other factors. Even so, be aware that Koonenberry Gold is showing 5 warning signs in our investment analysis , and 4 of those are a bit unpleasant…
But note: Koonenberry 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 Australian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.