Golden Minerals Co Stock Appea
Golden Minerals Co (AMEX: AUMN, 30-year-old Financials) stock gives all indications of being significantly overvalued, according to the GuruFocus value calculation. The GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock is to trade. It is calculated based on the historical multiples at which the stock has traded, the company’s past growth, and analysts’ estimates of the company’s future performance. If a share’s price is significantly above the GF value line, it is overvalued and its future performance may be poor. On the other hand, if it is significantly below the GF value line, its future return is likely to be higher. At its current price of $ 0.6214 per share and market cap of $ 101 million, shares of Golden Minerals Co would be significantly overvalued. Golden Minerals Co’s GF value is shown in the table below.
Since Golden Minerals Co is significantly overvalued, the long-term performance of its shares will likely be much lower than the future growth of its business.
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Since investing in companies with poor financial strength could result in a permanent loss of capital, investors should carefully consider the financial strength of a company before deciding whether or not to buy shares. Examining the cash-to-debt ratio and interest coverage can provide a good initial perspective on the financial strength of the business. Golden Minerals Co has a cash-to-debt ratio of 23.91, which ranks in the average for companies in the metals and mining industry. Based on this, GuruFocus ranks Golden Minerals Co’s financial strength as 5 out of 10, which suggests a fair track record. Here is Golden Minerals Co’s debt and cash flow over the past several years:
Investing in profitable businesses carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a business with high profit margins offers better performance potential than a business with low profit margins. Golden Minerals Co has been profitable 0 years in the past 10 years. In the past 12 months, the company reported revenues of $ 6.2 million and a loss of $ 0.064 per share. Its operating margin of -131.73% worse than 82% of companies in the metals and mining industry. Overall, GuruFocus rates Golden Minerals Co’s profitability as poor. Here is Golden Minerals Co’s sales and net income for the past few years:
One of the most important factors in the valuation of a business is growth. Long-term equity performance is closely linked to growth, according to GuruFocus research. Firms that grow faster create more shareholder value, especially if that growth is profitable. Golden Minerals Co’s average annual revenue growth is -16.6%, which is worse than 76% of companies in the metals and mining industry. The 3-year average EBITDA growth is -58.7%, which ranks in the bottom 10% of companies in the metals and mining industry.
A company’s profitability can also be assessed by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) The extent to which a business 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 should 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 to create value for its shareholders. Over the past 12 months, Golden Minerals Co’s ROIC is -91.32 while its WACC is 8.93. Golden Minerals Co’s historical ROIC vs WACC comparison is shown below:
To conclude, the stock of Golden Minerals Co (AMEX: AUMN, 30 years Financials) seems to be significantly overvalued. The financial situation of the company is fair and its profitability is poor. Its growth ranks among the bottom 10% of companies in the metals and mining industry. To learn more about Golden Minerals Co’s shares, you can view its 30-year financial data here.
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