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Leviathan Cannabis Group Inc. (CVE:EPIC) shareholders might understandably be very concerned that the share price has dropped 45% in the last quarter. But that doesn’t change the fact that the returns over the last three years have been spectacular. In fact, the share price has taken off in that time, up 1100%. Arguably, the recent fall is to be expected after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.

It really delights us to see such great share price performance for investors.

View our latest analysis for Leviathan Cannabis Group

We don’t think Leviathan Cannabis Group’s revenue of CA$61,403 is enough to establish significant demand. 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. Investors will be hoping that Leviathan Cannabis Group can make progress and gain better traction for the business, before it runs low on cash.

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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Leviathan Cannabis Group has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

Leviathan Cannabis Group had liabilities exceeding cash by CA$5.1m when it last reported in November 2019, according to our data. That makes it extremely high risk, in our view. So the fact that the stock is up 25% per year, over 3 years shows that high risks can lead to high rewards, sometimes. It’s clear more than a few people believe in the potential. You can click on the image below to see (in greater detail) how Leviathan Cannabis Group’s cash levels have changed over time.

TSXV:EPIC Historical Debt March 30th 2020

Of course, the truth is that it is hard to value companies without much revenue or profit. 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. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

While the broader market lost about 24% in the twelve months, Leviathan Cannabis Group shareholders did even worse, losing 60%. 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. Longer term investors wouldn’t be so upset, since they would have made 19%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we’ve discovered 6 warning signs for Leviathan Cannabis Group (4 are a bit concerning!) that you should be aware of before investing here.

Leviathan Cannabis Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

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.

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. Thank you for reading.

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