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Should Appia Energy (CNSX:API) Be Disappointed With Their 44% Profit?

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Appia Energy Corp. (CNSX:API) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But don't let that distract from the very nice return generated over three years. In fact, the company's share price bested the return of its market index in that time, posting a gain of 44%.

View our latest analysis for Appia Energy

Appia Energy hasn't yet reported any revenue, so it's as much a business idea as an actual business. 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 Appia Energy 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. 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).

When it reported in March 2019 Appia Energy had minimal cash in excess of all liabilities consider its expenditure: just CA$683k to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. It's a testament to the popularity of the business plan that the share price gained 13% per year, over 3 years, despite the weak balance sheet. You can see in the image below, how Appia Energy's cash levels have changed over time (click to see the values). You can see in the image below, how Appia Energy's cash levels have changed over time (click to see the values).

CNSX:API Historical Debt, July 31st 2019
CNSX:API Historical Debt, July 31st 2019

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. However you can take a look at whether insiders have been buying up shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.

A Different Perspective

Pleasingly, Appia Energy's total shareholder return last year was 24%. That's better than the annualized TSR of 13% over the last three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research Appia Energy in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

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.