Easy Come, Easy Go: How Athabasca Oil Shareholders Got Unlucky And Saw 89% Of Their Cash Evaporate

Long term investing works well, but it doesn’t always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for anyone who held Athabasca Oil Corporation (TSE:ATH) for five whole years – as the share price tanked 89%.

We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.

View our latest analysis for Athabasca Oil

Given that Athabasca Oil didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That’s because it’s hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last half decade, Athabasca Oil saw its revenue increase by 54% per year. That’s well above most other pre-profit companies. So on the face of it we’re really surprised to see the share price has averaged a fall of 35% each year, in the same time period. You’d have to assume the market is worried that profits won’t come soon enough. While there might be an opportunity here, you’d want to take a close look at the balance sheet strength.

The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).

TSX:ATH Income Statement, February 26th 2019
TSX:ATH Income Statement, February 26th 2019

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Athabasca Oil will earn in the future (free profit forecasts)

A Different Perspective

Investors in Athabasca Oil had a tough year, with a total loss of 14%, against a market gain of about 2.6%. 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, longer term shareholders are suffering worse, given the loss of 35% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Athabasca Oil by clicking this link.

Athabasca Oil is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.