Western Goldfields (WGW.DL)

ValueNAV (42.97) Submitted: 3/24/2008 5:06:56 AM : Start Price: $3.01 WGW.DL Score: -23.39

Although gold has been "hot" lately, companies as poor as this will not be one of the winners. One of the low cost producers with good financial results will triumph. For a great example of a company and a good investment, one should investigate Divestco (Toronto stock exchange DVT, DVTIF).Western Goldfields' metrics are extremely poor (and have been the last 6 years):1) Increasingly negative revenue growth (latest at -40% despite the huge run up in gold prices).2) ROA & ROIC lately around -20%, but as low as -50%3) ROE -120% the last TWO YEARS, despite commodity prices.4) EBITDA and net income margins LESS THAN -120%5) debt/capital is 50%Given that the company has no cash flow from operations (or net income), it gets all of its cash from loans and equity issuances. In 2006 it has issued shares and taken on a loan with a total amount 12 TIMES more than it ever has in the past. When investors and banks decide to stop providing charity funds that they will never see again, this company will become insolvent and then bankrupt. It is only a matter of time.