Speculative Company

Speculative Company

A company with a large number of assets tied up in projects with uncertain returns.

Notes:

The projects that a speculative company is participating in have a high probability of failure. However, should a project succeed, potential returns can be very large.

Oil companies are an example of a speculative company, since they are continuously committing a large number of assets to exploration projects. These companies often experience many failures before a project succeeds. However, should they find oil, potential returns are huge.

The stock of speculative companies is not necessarily classified as speculative stock, since the expected return of an established speculative company's stock (such as Exxon Mobil Corp or Shell Canada) can be reasonably estimated.

See also: Return, Return on Assets, Risk, Speculative Stock