Is This Small-Cap Stock a Golden Opportunity?

GoldMining Inc. (TSX:GOLD) stock was a seven-bagger at one point. Should you invest in it now?

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Investors buy commodity stocks because they’re volatile. Investors aim to buy low and sell high. This can’t be truer for small-cap, growth-focused mining stocks, such as GoldMining (TSX:GOLD).

In the past five years, GoldMining has traded as low as about $0.40 per share and as high as $3 per share. So, investors could have gotten a seven-bagger! However, it’s impossible to catch the bottom and sell at the high. Moreover, you’ll notice that the stock has been in a downward trend since late 2016. If you’re looking for a quick trade for big gains, you could be waiting for a long time.

GoldMining only moved from the TSX Venture Exchange to the Toronto Stock Exchange in June, so you might not have heard of the stock. The company is a mineral exploration company that acquires and develops gold assets in the stable regions of the Americas. It now controls a diversified portfolio of resource-stage gold and gold-copper projects in Canada, U.S.A., Brazil, Colombia, and Peru.

There’s much to like and dislike about the company.

What to like about GoldMining

GoldMining has large insider ownership — about 20% to be exact. So, management’s interests are aligned with the interests of its shareholders. The company also has about 36% held by institutional investors and about 41% held by retail investors. It has seven key shareholders, including IAMGOLD and Sprott Global.

GoldMining has strategically made a number of acquisitions since 2012, when there has been a bear commodity market. That’s when assets can be bought at cheaper prices.

GoldMining has a solid balance sheet with about $9.5 million of net cash.

From a valuation standpoint based on a price-to-book ratio (P/B) of 1.58, GoldMining is trading at the low end of its valuation range. In comparison, its five-year P/B is about 3.5.

What to dislike about GoldMining

As of the last reported quarter, GoldMining hasn’t made any sales yet. And of course, it’s operating at a loss.

For its acquisitions, it tends to like using a mix of cash and equity. Each time it pushes out common stock, it dilutes existing shareholders.

Investor takeaway

As of now, GoldMining can only be considered a speculative growth or, at best, an aggressive growth investment, as it has no revenue and no profit. Investors interested in making a bet should wait until the stock ends its current downward trend and starts turning around before buying a position.

Investors are probably better off looking for other businesses that have revenues, profits, and a surer chance of becoming multi-baggers — even if it means taking longer to get there.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has no position in any of the stocks mentioned.

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