Yahoo Finance Imagine Owning Jericho Oil (CVE:JCO) And Trying To Stomach The 73% Share Price Drop
As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of Jericho Oil Corporation (CVE:JCO), who have seen the share price tank a massive 73% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 56% in the last year. Furthermore, it's down 25% in about a quarter. That's not much fun for holders.
View our latest analysis for Jericho Oil
We don't think Jericho Oil's revenue of CA$266,864 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. For example, they may be hoping that Jericho Oil 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. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Jericho Oil has already given some investors a taste of the bitter losses that high risk investing can cause.
Jericho Oil had cash in excess of all liabilities of CA$1.8m when it last reported (September 2019). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. We'd venture that shareholders are concerned about the need for more capital, because the share price has dropped 35% per year, over 3 years . You can see in the image below, how Jericho Oil's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how Jericho Oil's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. You can click here to see if there are insiders selling.
A Different Perspective
Jericho Oil shareholders are down 56% for the year, but the market itself is up 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. 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. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For example, we've discovered 7 warning signs for Jericho Oil (3 are a bit unpleasant!) that you should be aware of before investing here.
But note: Jericho Oil may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
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. Thank you for reading.
