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Appia Energy Corp. (CNSX:API) shareholders have seen the share price descend 12% over the month. But that doesn’t change the fact that the returns over the last year have been pleasing. After all, the share price is up a market-beating 45% in that time.
With zero revenue generated over twelve months, we don’t think that Appia Energy has proved its business plan yet. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Appia Energy finds fossil fuels with an exploration program, before it runs out of money.
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. 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.
Appia Energy had cash in excess of all liabilities of just CA$683k when it last reported (March 2019). So if it hasn’t remedied the situation already, it will almost certainly have to raise more capital soon. Given how low on cash the it got, investors must really like its potential for the share price to be up 45% in the last year. The image below shows how Appia Energy’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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, many of the best investors like to check if insiders have been buying shares. It’s often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
It’s nice to see that Appia Energy shareholders have gained 45% (in total) over the last year. So this year’s TSR was actually better than the three-year TSR (annualized) of 9.6%. Given the track record of solid returns over varying time frames, it might be worth putting Appia Energy on your watchlist. Before spending more time on Appia Energy it might be wise to click here to see if insiders have been buying or selling shares.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.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.