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Did Changing Sentiment Drive Avricore Health's (CVE:AVCR) Share Price Down A Disastrous 96%?

Simply Wall St

Avricore Health Inc. (CVE:AVCR) shareholders should be happy to see the share price up 20% in the last month. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Like a ship taking on water, the share price has sunk 96% in that time. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The fundamental business performance will ultimately determine if the turnaround can be sustained.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

See our latest analysis for Avricore Health

We don't think Avricore Health's revenue of CA$1,786 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. 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 Avricore Health 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 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. Avricore Health has already given some investors a taste of the bitter losses that high risk investing can cause.

Avricore Health had liabilities exceeding cash by CA$538k when it last reported in September 2019, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 48% per year, over 5 years , it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how Avricore Health's cash levels have changed over time (click to see the values). You can see in the image below, how Avricore Health's cash levels have changed over time (click to see the values).

TSXV:AVCR Historical Debt, December 4th 2019

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? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

Investors in Avricore Health had a tough year, with a total loss of 70%, against a market gain of about 11%. 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 48% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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