Morning Lou,
What are your thoughts on CRK? It seems to have a relatively low market cap opposed to revenues.
Thanks,
Neil
Hey Neil,
Thanks for the assignment.
Crocodile Gold Corp. (CRK) is a Canadian gold mining and exploration company with three operating mines in Australia. The company expects to produce between 205,000 and 220,000 ounces of gold in 2015 with all in sustainable cash costs in a range of $1,020.00 and $1,100.00 an ounce. When you consider the price of gold you can see what is putting a damper on the stock and indeed the entire sector. The market cap issue you are concerned with is mostly driven by the fact that the company has to spread its earnings over 700.4 million shares on a fully diluted basis. Its a classic example of having way more bagels than the schmear can cover.
The research conducted for this study identified a Jan. 14, 2015, press release where CRK announced that it had bought out AuRico Gold's interest in a shared free cash flow sharing arrangement. This will provide the company with the resources management deems strategic to their five year plan. The buy out gave the stock a lift to a new price level where it is building support.
An analysis of the charts will add another element to your evaluation of this stock.
The three-year chart for gold tells the external story that has side swiped CRK. Gold has experienced two legs down since 2012 when it traded close to $1,750.00. The bounce off the November 2014 lows met resistance near $1,300.00 and is now testing support near $1,200.00. If the price of your primary product is soft expect it to hammer your stock.
The three-year chart indicates that the stock tracked gold higher in late 2014 and then jumped on the announcement of the AuRico Gold deal in January of 2015. The shares hit resistance at $0.23 and have pulled back to support along the 200-day moving average. Presently the MACD and the RSI are generating sell signals that need to be respected.
The six-month chart provides a close up of the momentum indicators turning lower and the base building long the 200-day moving average. The best way to approach this stock if you are determined to be a buyer is to phase in your purchases. Buy a portion now and determine if support near $0.21 holds. If CRK starts to move higher add to your position. If it breaks below support then cut your losses. Keep in mind that this is a highly speculative stock.
Make it a profitable day and happy capitalism!
Have your own question for Lou? Send it in to lou@happycapitalism.com.