We’re definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Athabasca Oil Corporation (TSE:ATH) for half a decade as the share price tanked 90%. And we doubt long term believers are the only worried holders, since the stock price has declined 60% over the last twelve months. Furthermore, it’s down 29% in about a quarter. That’s not much fun for holders. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
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.
Because Athabasca Oil is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over five years, Athabasca Oil grew its revenue at 49% per year. That’s well above most other pre-profit companies. So it’s not at all clear to us why the share price sunk 37% throughout that time. 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.
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Athabasca Oil
A Different Perspective
While the broader market lost about 0.1% in the twelve months, Athabasca Oil shareholders did even worse, losing 60%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 37% 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. 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.
There are plenty of other companies that have insiders buying up shares. You probably do 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.