Yahoo Finance Did Changing Sentiment Drive Arctic Hunter Energy's (CVE:AHU) Share Price Down A Painful 77%?
It is doubtless a positive to see that the Arctic Hunter Energy Inc. (CVE:AHU) share price has gained some 67% in the last three months. But the last three years have seen a terrible decline. To wit, the share price sky-dived 77% in that time. So it sure is nice to see a big of an improvement. Only time will tell if the company can sustain the turnaround.
See our latest analysis for Arctic Hunter Energy
We don't think Arctic Hunter Energy's revenue of CA$89,254 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Arctic Hunter Energy will discover or develop fossil fuel before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as Arctic Hunter Energy investors might realise.
Our data indicates that Arctic Hunter Energy had CA$93k more in total liabilities than it had cash, when it last reported in December 2019. That makes it extremely high risk, in our view. But with the share price diving 39% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Arctic Hunter Energy's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
While the broader market lost about 28% in the twelve months, Arctic Hunter Energy shareholders did even worse, losing 69%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 16% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Arctic Hunter Energy (at least 3 which don't sit too well with us) , and understanding them should be part of your investment process.
Of course Arctic Hunter Energy may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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