Should you buy shares of Gage Roads Brewing Co Limited?

Gage Roads Brewing Co Limited (ASX:GRB) ended the week in spectacular fashion, lifting 9.6% per share.

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Gage Roads Brewing Co Limited (ASX: GRB) ended the week in spectacular fashion, lifting 9.6% to trade at 5.7 cents.

Although the company didn't release any news that would specifically explain the sudden surge in price, it will certainly come as a relief for long-term shareholders who, prior to today, had watched the stock plunge 68% since the beginning of the year. It hit a low of 3.7 cents late last month, down from a 52-week high of 16.5 cents.

In case it wasn't obvious from the share price performance, Gage Roads has been a serial underperformer for investors. Most recently, it confirmed that it expects total volumes to be down 15-20% for the full-year with total carton and keg sales down 21% over the nine months to the end of March.

While Woolworths Limited (ASX: WOW) is one of the business' major customers, the food and liquor giant has been actively reducing its inventories as part of its working capital strategy, while it is also working on new initiatives to improve group profitability. That in itself suggests there could be more pain for Gage Roads' sales in the future.

However, the company is engaged in an organisation-wide cost review to improve overall profit margins and investors appear willing to take that chance based on its recent low prices. Indeed, although the risks of an investment in the business have increased, its price has fallen to help even out the risk/reward payoff.

Nonetheless, I still believe there are more promising investment alternatives for investors willing to dig a little deeper, which could generate far greater returns than Gage Roads over the coming years.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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