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It is a pleasure to report that the CO2 Gro Inc. (CVE:GROW) is up 103% in the last quarter. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Like a ship taking on water, the share price has sunk 85% in that time. While the recent increase might be a green shoot, we’re certainly hesitant to rejoice. The million dollar question is whether the company can justify a long term recovery.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
We don’t think CO2 Gro’s revenue of CA$4,665 is enough to establish significant demand. This state of affairs suggests that venture capitalists won’t provide funds on attractive terms. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that CO2 Gro will significantly advance the business plan before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is almost always a chance they will need to raise more capital, and their progress – and share price – will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some CO2 Gro investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Our data indicates that CO2 Gro had net debt of CA$495,166 when it last reported in September 2018. That puts it in the highest risk category, according to our analysis. But with the share price diving 32% per year, over 5 years, it’s probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how CO2 Gro’s cash and debt levels have changed over time (click to see the values).
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. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.
A Different Perspective
We’re pleased to report that CO2 Gro shareholders have received a total shareholder return of 30% over one year. Notably the five-year annualised TSR loss of 32% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Before spending more time on CO2 Gro it might be wise to click here to see if insiders have been buying or selling shares.
Of course CO2 Gro may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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 firstname.lastname@example.org. 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.