Yahoo Finance The Horizon Petroleum (CVE:HPL) Share Price Is Down 91% So Some Shareholders Are Rather Upset
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While not a mind-blowing move, it is good to see that the Horizon Petroleum Ltd. (CVE:HPL) share price has gained 30% in the last three months. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 91% lower after that period. So we don't gain too much confidence from the recent recovery. The important question is if the business itself justifies a higher share price in the long term.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
View our latest analysis for Horizon Petroleum
With zero revenue generated over twelve months, we don't think that Horizon Petroleum has proved its business plan yet. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Horizon Petroleum will discover or develop fossil fuel before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Horizon Petroleum has already given some investors a taste of the bitter losses that high risk investing can cause.
Horizon Petroleum had liabilities exceeding cash by CA$633,317 when it last reported in February 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 38% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Horizon Petroleum's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can click on the image below to see (in greater detail) how Horizon Petroleum's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? 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
It's nice to see that Horizon Petroleum shareholders have received a total shareholder return of 30% over the last year. That certainly beats the loss of about 38% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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 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.
