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Some Clinical Laserthermia Systems (STO:CLS B) Shareholders Are Down 35%

Simply Wall St

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Clinical Laserthermia Systems AB (publ) (STO:CLS B) share price slid 35% over twelve months. That's disappointing when you consider the market returned 29%. We note that it has not been easy for shareholders over three years, either; the share price is down 34% in that time. In the last ninety days we've seen the share price slide 49%.

See our latest analysis for Clinical Laserthermia Systems

Clinical Laserthermia Systems recorded just kr5,555,927 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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). Investors will be hoping that Clinical Laserthermia Systems 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. 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.

Our data indicates that Clinical Laserthermia Systems had kr11m more in total liabilities than it had cash, when it last reported in September 2019. That puts it in the highest risk category, according to our analysis. But since the share price has dived -35% in the last year , 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 Clinical Laserthermia Systems's cash levels have changed over time. You can click on the image below to see (in greater detail) how Clinical Laserthermia Systems's cash levels have changed over time.

OM:CLS B Historical Debt, January 26th 2020

Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? It would bother me, that's for sure. You can click here to see if there are insiders selling.

What about the Total Shareholder Return (TSR)?

We've already covered Clinical Laserthermia Systems's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Clinical Laserthermia Systems's TSR, at -32% is higher than its share price return of -35%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

Clinical Laserthermia Systems shareholders are down 32% for the year, but the market itself is up 29%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5.2% over the last half decade. 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 business. 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 instance, we've identified 5 warning signs for Clinical Laserthermia Systems (2 are potentially serious) that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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