Even the best investor on earth makes unsuccessful investments. But it should be a priority to avoid stomach churning catastrophes, wherever possible. We wouldn't blame Green 2 Blue Energy Corp. (CNSX:GTBE) shareholders if they were still in shock after the stock dropped like a lead balloon, down 86% in just one year. That'd be a striking reminder about the importance of diversification. Green 2 Blue Energy hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 63% in the last three months.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
With just CA$1,378,444 worth of revenue in twelve months, we don't think the market considers Green 2 Blue Energy to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Green 2 Blue Energy finds fossil fuels with an exploration program, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Green 2 Blue Energy has already given some investors a taste of the bitter losses that high risk investing can cause.
Green 2 Blue Energy had liabilities exceeding cash by CA$2.2m when it last reported in March 2019, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 86% in the last year , it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Green 2 Blue Energy'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 Green 2 Blue Energy's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Given that the market gained 4.6% in the last year, Green 2 Blue Energy shareholders might be miffed that they lost 86%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 63% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before spending more time on Green 2 Blue Energy it might be wise to click here to see if insiders have been buying or selling shares.
But note: Green 2 Blue Energy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.