The stock of Goldgroup Mining (OTCPK:GGAZF, 30-year Financials) is estimated to be modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $0.037 per share and the market cap of $7.2 million, Goldgroup Mining stock shows every sign of being modestly overvalued. GF Value for Goldgroup Mining is shown in the chart below.
Because Goldgroup Mining is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 0.5% over the past five years.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Goldgroup Mining has a cash-to-debt ratio of 1.02, which which ranks worse than 71% of the companies in Metals & Mining industry. The overall financial strength of Goldgroup Mining is 3 out of 10, which indicates that the financial strength of Goldgroup Mining is poor. This is the debt and cash of Goldgroup Mining over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Goldgroup Mining has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $19.9 million and loss of $0.011 a share. Its operating margin is -10.14%, which ranks worse than 69% of the companies in Metals & Mining industry. Overall, GuruFocus ranks the profitability of Goldgroup Mining at 1 out of 10, which indicates poor profitability. This is the revenue and net income of Goldgroup Mining over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Goldgroup Mining is 0.5%, which ranks in the middle range of the companies in Metals & Mining industry. The 3-year average EBITDA growth is -18.9%, which ranks worse than 79% of the companies in Metals & Mining industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Goldgroup Mining's ROIC is -33.97 while its WACC came in at 9.80. The historical ROIC vs WACC comparison of Goldgroup Mining is shown below:
In summary, Goldgroup Mining (OTCPK:GGAZF, 30-year Financials) stock gives every indication of being modestly overvalued. The company's financial condition is poor and its profitability is poor. Its growth ranks worse than 79% of the companies in Metals & Mining industry. To learn more about Goldgroup Mining stock, you can check out its 30-year Financials here.
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