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Did Changing Sentiment Drive BluGlass's (ASX:BLG) Share Price Down A Worrying 61%?

Simply Wall St

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term BluGlass Limited (ASX:BLG) shareholders have had a particularly rough ride in the last three year. Sadly for them, the share price is down 61% in that time. And more recent buyers are having a tough time too, with a drop of 48% in the last year. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days.

View our latest analysis for BluGlass

We don't think BluGlass's revenue of AU$424,555 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 BluGlass will significantly advance the business plan before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. 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. BluGlass has already given some investors a taste of the bitter losses that high risk investing can cause.

BluGlass had cash in excess of all liabilities of just AU$3.8m 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. With that in mind, you can understand why the share price dropped 27% per year, over 3 years . You can see in the image below, how BluGlass's cash levels have changed over time (click to see the values). The image below shows how BluGlass's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

ASX:BLG Historical Debt, January 11th 2020

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

A Different Perspective

While the broader market gained around 25% in the last year, BluGlass shareholders lost 48%. 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. On the bright side, long term shareholders have made money, with a gain of 2.4% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

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.

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.