Yahoo Finance Did Changing Sentiment Drive Arctic Hunter Energy's (CVE:AHU) Share Price Down A Worrying 70%?
Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. Zooming in on an example, the Arctic Hunter Energy Inc. (CVE:AHU) share price dropped 70% in the last half decade. That's an unpleasant experience for long term holders. And it's not just long term holders hurting, because the stock is down 25% in the last year. On top of that, the share price has dropped a further 29% in a month.
Check out our latest analysis for Arctic Hunter Energy
With just CA$98,316 worth of revenue in twelve months, we don't think the market considers Arctic Hunter Energy to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Arctic Hunter Energy finds fossil fuels with an exploration program, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. The is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. 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.
Arctic Hunter Energy had net cash of just CA$19k when it last reported (December 2018). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 21% per year, over 5 years. You can click on the image below to see (in greater detail) how Arctic Hunter Energy's cash and debt levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. You can click here to see if there are insiders selling.
A Different Perspective
Arctic Hunter Energy shareholders are down 25% for the year, but the market itself is up 6.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 21% over the last half decade. We realise that Buffett 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 businesses. If you would like to research Arctic Hunter Energy in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like Arctic Hunter Energy better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.
