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Did archTIS's (ASX:AR9) Share Price Deserve to Gain 14%?

Simply Wall St

While archTIS Limited (ASX:AR9) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 11% in the last quarter. Taking a longer term view we see the stock is up over one year. However, its return of 14% does fall short of the market return of, 20%.

See our latest analysis for archTIS

archTIS recorded just AU$1,022,210 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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. It seems likely some shareholders believe that archTIS will significantly advance the business plan before too long.

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.

archTIS had cash in excess of all liabilities of just AU$2.3m when it last reported (June 2019). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. It's a testament to the popularity of the business plan that the share price gained 155% in the last year , despite the weak balance sheet. You can see in the image below, how archTIS's cash levels have changed over time (click to see the values). You can see in the image below, how archTIS's cash levels have changed over time (click to see the values).

ASX:AR9 Historical Debt, February 11th 2020

In reality it's hard to have much certainty when valuing a business that has neither 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. You can click here to see if there are insiders buying.

A Different Perspective

We're happy to report that archTIS are up 14% over the year. While it's always nice to make a profit on the stock market, we do note that the TSR was no better than the broader market return of about 20%. We regret to inform any shareholders that the share price dropped another 11% in the last three months. It's possible that this is just a short term share price setback. If the business executes and delivers key metric growth, it could definitely be worth putting on your watchlist. 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 archTIS (4 are a bit concerning) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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