We’re definitely into long term investing, but some companies are simply bad investments over any time frame. We don’t wish catastrophic capital loss on anyone. Spare a thought for those who held Graphene 3D Lab Inc. (CVE:GGG) for five whole years – as the share price tanked 96%. And it’s not just long term holders hurting, because the stock is down 43% in the last year. Furthermore, it’s down 24% in about a quarter. That’s not much fun for holders.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
We don’t think Graphene 3D Lab’s revenue of US$969,667 is enough to establish significant demand. 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. Investors will be hoping that Graphene 3D Lab can make progress and gain better traction for the business, before it runs low on cash.
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. It certainly is a dangerous place to invest, as Graphene 3D Lab investors might realise.
Our data indicates that Graphene 3D Lab had US$177,227 more in total liabilities than it had cash, when it last reported in February 2019. That puts it in the highest risk category, according to our analysis. But since the share price has dived -47% per year, over 5 years, it looks like some investors think it’s time to abandon ship, so to speak. You can see in the image below, how Graphene 3D Lab’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? It would bother me, that’s for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While the broader market gained around 3.4% in the last year, Graphene 3D Lab shareholders lost 43%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn’t as bad as the 47% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.