Yahoo Finance The Pennine Petroleum (CVE:PNN) Share Price Is Down 75% So Some Shareholders Are Rather Upset
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It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. So spare a thought for the long term shareholders of Pennine Petroleum Corporation (CVE:PNN); the share price is down a whopping 75% in the last twelve months. A loss like this is a stark reminder that portfolio diversification is important. We note that it has not been easy for shareholders over three years, either; the share price is down 67% in that time. There was little comfort for shareholders in the last week as the price declined a further 33%.
See our latest analysis for Pennine Petroleum
We don't think Pennine Petroleum's revenue of CA$100,766 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Pennine Petroleum will discover or develop fossil fuel before too long.
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. It certainly is a dangerous place to invest, as Pennine Petroleum investors might realise.
Our data indicates that Pennine Petroleum had net debt of CA$1,029,714 when it last reported in September 2018. That puts it in the highest risk category, according to our analysis. But with the share price diving 75% in the last year, it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how Pennine Petroleum's cash and debt 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? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Investors in Pennine Petroleum had a tough year, with a total loss of 75%, against a market gain of about 7.9%. 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 13% per year over five years. 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. Before spending more time on Pennine Petroleum it might be wise to click here to see if insiders have been buying or selling shares.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.
