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We're definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held Terrace Energy Corp. (CVE:TZR) for five whole years - as the share price tanked 100%. And it's not just long term holders hurting, because the stock is down 50% in the last year. Even worse, it's down 33% in about a month, which isn't fun at all.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
See our latest analysis for Terrace Energy
Terrace Energy didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Terrace 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. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Terrace Energy has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that Terrace Energy had US$16,436,026 more in total liabilities than it had cash, when it last reported in October 2018. That puts it in the highest risk category, according to our analysis. But since the share price has dived -65% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Terrace Energy's cash levels have changed over time.
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. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.