Yahoo Finance Imagine Owning Sahara Energy (CVE:SAH) While The Price Tanked 57%
We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. For example, after five long years the Sahara Energy Ltd. (CVE:SAH) share price is a whole 57% lower. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 25%. Unhappily, the share price slid 25% in the last week.
View our latest analysis for Sahara Energy
We don't think Sahara Energy's revenue of CA$164,417 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. It seems likely some shareholders believe that Sahara Energy will discover or develop fossil fuel before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Sahara Energy has already given some investors a taste of the bitter losses that high risk investing can cause.
Sahara Energy has plenty of cash in the bank, with cash in excess of all liabilities sitting at CA$8.3m, when it last reported (September 2019). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 16% per year, over 5 years , it seems like the market might have been over-excited previously. You can see in the image below, how Sahara Energy's cash levels have changed over time (click to see the values). You can see in the image below, how Sahara Energy's cash levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While the broader market gained around 14% in the last year, Sahara Energy shareholders lost 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 16% per year over five years. 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. You could get a better understanding of Sahara Energy's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.
