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The Actinogen Medical (ASX:ACW) Share Price Is Down 82% So Some Shareholders Are Rather Upset

Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Actinogen Medical Limited (ASX:ACW) investors who have held the stock for three years as it declined a whopping 82%. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 67% lower in that time. Shareholders have had an even rougher run lately, with the share price down 72% in the last 90 days.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

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Check out our latest analysis for Actinogen Medical

We don't think Actinogen Medical's revenue of AU$3,161,454 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Actinogen Medical has the funding to invent a new product before too long.

We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Actinogen Medical investors have already had a taste of the bitterness stocks like this can leave in the mouth.

Actinogen Medical had net cash of AU$13m when it last reported (December 2018). 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 43% per year, over 3 years, it seems likely that the need for cash is weighing on investors' minds. You can click on the image below to see (in greater detail) how Actinogen Medical's cash levels have changed over time.

ASX:ACW Historical Debt, May 20th 2019
ASX:ACW Historical Debt, May 20th 2019

Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.

A Different Perspective

While the broader market gained around 8.5% in the last year, Actinogen Medical shareholders lost 67%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6.5% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. If you would like to research Actinogen Medical in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

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 AU exchanges.

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.

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. Thank you for reading.

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