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1-Star Stocks Poised to Plunge: Gold Resource?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, gold explorer Gold Resource (AMEX: GORO  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Gold Resource's business and see what CAPS investors are saying about the stock right now.

Gold Resource facts

Headquarters (founded) Denver (1998)
Market Cap $1.2 billion
Industry Precious metals and minerals
Trailing-12-Month Revenue $105.2 million
Management Co-Founder/Chairman/CEO William Reid
CFO Paul Oberman
Return on Capital (average, past 3 years) (61.4%)
Cash/Debt $52.0 million / $0
Dividend Yield 2.6%
Competitors BHP Billiton
Grupo Mexico SAB de CV
Rio Tinto

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 51% of the 215 members who have rated Gold Resource believe the stock will underperform the S&P 500 going forward.

Earlier this month, one of those Fools, All-Star BuffettJunior1, tapped the stock as a questionable income opportunity:

It seems that if you just put the word "gold" in your company name the stock is automatically worth a thousand times its fair value. This is the same trick used in the 90's where all you had to do was put "dot com" in the company name and the stock price would shoot up to some ridiculous valuation. I was also very surprised to see that this company pays a dividend. Since this is still an exploration stage company and has obviously never been profitable, then why in the world would they pay a dividend? ... I truly cannot understand why anyone would invest in this...

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (7) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 15, 2012, at 2:56 PM, JonPavitt wrote:

    "On CAPS, 51% of the 215 members who have rated Gold Resource believe the stock will underperform the S&P 500 going forward."

    So that would be half of them. Not exactly radical is it?

    And BuffettJunior1 said "Since this is still an exploration stage company" - wrong, it's been in production for a year. You would think that a "Fools All-Star" might be at least capable of getting their facts right!

  • Report this Comment On March 16, 2012, at 1:16 PM, stickboy2012 wrote:

    March 16th 2012: GORO with PE of 23.22 and EPS of $1.03...yeah, that sounds like dot com mania to me. Jeebus, who writes this stuff?

  • Report this Comment On March 18, 2012, at 2:11 PM, Kauaicat wrote:

    Unlike most mining companies, GORO did not waste tens of millions of dollars drilling to prove up a huge resource before beginning mining. Instead, the Reid brothers focused on creating operating cash flow from a smaller open-pittable ore body, and moved smoothly into underground mining without major dilution or debt. Their stated general business plan was to allocate cash flow from operations 1/3 to exploration and development, 1/3 to dividends and 1/3 to equity, and they followed this plan. GORO's management should be commended for a textbook example of shareholder-friendly business development.

  • Report this Comment On March 23, 2012, at 8:01 PM, mphailey wrote:

    Tip of the cap to Kauaicat for his informative comment.

    Mr. Brian D. Pacampara, I invite you and buffetjunior1 to sell short this company. It is now paying a gold and/or silver dividend.

    To the readers out there: When some 'fool' whose username is BuffetJunior1 has something disparaging to say about a gold company can you really be surprised? BuffetJunior??? It is downright funny.

    I repeat, I invite the authors of the article and all the buffet masses to short sell this company.

  • Report this Comment On April 30, 2012, at 11:59 AM, iamamadeus wrote:

    @ GORO short sellers:

    You are panicking: We saw the trading volume last Friday >:->>. You are trapped. You are underwater. And we know it.


    --> commercial production since July 2010

    --> 47 Million US$ paid out as dividend

    --> INCREASES MONTHLY DIVIDEND 20% in April 2012

    --> Q1/2012: 30,500 ounces AuEq production

    @ Pacampara

    I follow you...

  • Report this Comment On May 07, 2012, at 12:18 PM, iamamadeus wrote:

    May 7 2012: Look at that volume! It is fun watching a trapped-panicked short seller try to keep GORO from breaking out from a powerful reverse pattern.

    In order to understand the strength underlying the GORO price just hold its performace of the last month against that of the mining sector in general.

    There sure are buyers with strong hands in the market.

    Given GORO's tight share structure I don't see much potential for influencing its price beyond intraday games.

    I enjoy watching this shorty go bust.

  • Report this Comment On May 14, 2012, at 4:15 AM, iamamadeus wrote:

    COLORADO SPRINGS ¡V May 10, 2012 ¡V Gold Resource Corporation (NYSE Amex: GORO)

    today announced record results for its first quarter ending March 31, 2012, including an increase

    of 308% production of precious metal gold equivalent and an increase of 281% mine gross profit

    over the first quarter of 2011. Gold Resource Corporation is a low-cost gold producer with

    operations in the southern state of Oaxaca, Mexico.

    2012 Q1 HIGHLIGHTS

    - Record production of 30,528 ounces precious metal gold equivalent (AuEq)

    - h 308% AuEq production increase over Q1, 2011

    - Record mine gross profit generated $33.7 million

    - 281% mine gross profit increase over Q1, 2011

    - Total cash cost of $191 per ounce AuEq (including 5% royalty)

    - Record net income of $16.1 million or $0.30 per share

    - 693% net income increase over Q1, 2011

    - Pretax income of $23.4 million or $0.44 per share

    - Dividend distributions of $7.9 million, or $0.15 per share for quarter

    - Physical gold and silver treasury of $5.6 million

    - Successfully launched physical gold and silver dividend program

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