Those Who Purchased Torchlight Energy Resources (NASDAQ:TRCH) Shares Five Years Ago Have A 75% Loss To Show For It
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Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Torchlight Energy Resources, Inc. (NASDAQ:TRCH) during the five years that saw its share price drop a whopping 75%. And we doubt long term believers are the only worried holders, since the stock price has declined 22% over the last twelve months. The falls have accelerated recently, with the share price down 42% in the last three months.
Check out our latest analysis for Torchlight Energy Resources
With just US$1,112,035 worth of revenue in twelve months, we don't think the market considers Torchlight Energy Resources to have proven its business plan. You have to wonder why venture capitalists aren't funding it. 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. For example, they may be hoping that Torchlight Energy Resources finds fossil fuels with an exploration program, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Torchlight Energy Resources has already given some investors a taste of the bitter losses that high risk investing can cause.
Torchlight Energy Resources had liabilities exceeding cash by US$21,352,385 when it last reported in March 2019, according to our data. That puts it in the highest risk category, according to our analysis. But since the share price has dived -24% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Torchlight Energy Resources's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
A Different Perspective
Investors in Torchlight Energy Resources had a tough year, with a total loss of 22%, against a market gain of about 5.0%. 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. However, the loss over the last year isn't as bad as the 24% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Before spending more time on Torchlight Energy Resources it might be wise to click here to see if insiders have been buying or selling shares.
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 US 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.