Jericho Oil Corporation (CVE:JCO) shareholders should be happy to see the share price up 11% in the last month. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. The share price has failed to impress anyone , down a sizable 51% during that time. So we're not so sure if the recent bounce should be celebrated. But it could be that the fall was overdone.
Jericho Oil recorded just CA$353,891 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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. It seems likely some shareholders believe that Jericho Oil will discover or develop fossil fuel before too long.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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). Jericho Oil has already given some investors a taste of the bitter losses that high risk investing can cause.
Jericho Oil had cash in excess of all liabilities of CA$2.9m when it last reported (March 2019). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 13% per year, over 5 years, it seems likely that the need for cash is weighing on investors' minds. The image below shows how Jericho Oil's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how Jericho Oil's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. 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 regret to report that Jericho Oil shareholders are down 41% for the year. Unfortunately, that's worse than the broader market decline of 1.5%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before spending more time on Jericho Oil it might be wise to click here to see if insiders have been buying or selling shares.
If you are like me, then you will 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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