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Six warning signs for Gold Road Resources' (ASX:GOR) share price

2nd Apr '19 by Jack Brumby

As investors, we want to invest in the best and avoid those heading for trouble, but it's hard to keep tabs on hundreds of companies. That's a lot of noise and we've all got lives to lead. Even though Stockopedia's StockReports provide a wealth of financial data, filtering out the most dangerous stocks can be hard to do and takes time.

But what if you could gauge financial health with a single number?

This is what the Piotroski F-Score sets out to do. Unfortunately, what the F-Score algorithm says for Basic Materials operator Gold Road Resources (ASX:GOR) is not good - especially considering

revenues decreased from A$506K to A$0K abd net loss ballooned from A$7.7m to A$23.9m for the fiscal year ended 31 December 2018.


Why the Piotroski F-Score matters

The Piotroski F-Score is a nine-strong checklist split that, unlike most ratios, the F-Score looks more deeply into the direction in which a company’s financial health is moving. Keeping on top of these trends can help us anticipate how a stock might perform.

When a stock gets beaten down it falls to the bottom of the stock market. From here there it either:

  • Stumbles along, zombie-like,
  • Tumbles into administration, or
  • Recovers emphatically

Stanford Finance Professor Joseph Piotroski wanted to identify the latter. After settling on the F-Score, he produced some remarkable results.

Piotroski found that weak stocks with an F-Score of 2 or less are five times more likely to either go bankrupt or delist due to financial problems. Working our way through Piotroski's checklist, we can see that Gold Road Resources (ASX:GOR) gets a lowly F-Score of 2 out of a possible 9.


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The problem areas for Gold Road Resources identified here can be explored in more depth on Stockopedia's research platform. All the best investors have stringent due diligence processes that reduce the chances of them suffering big losses, so why not take a leaf out of their book?

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