U.S. markets closed

Did Changing Sentiment Drive Imaging Dynamics's (CVE:IDL) Share Price Down A Painful 87%?

Simply Wall St

Imaging Dynamics Company Ltd. (CVE:IDL) shareholders will doubtless be very grateful to see the share price up 100% in the last quarter. But that is meagre solace in the face of the shocking decline over three years. To wit, the share price sky-dived 87% in that time. So it's about time shareholders saw some gains. Only time will tell if the company can sustain the turnaround.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Check out our latest analysis for Imaging Dynamics

We don't think Imaging Dynamics's revenue of CA$627,492 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). It seems likely some shareholders believe that Imaging Dynamics will significantly advance the business plan before too long.

We think companies that have neither significant revenues nor profits are pretty 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. It certainly is a dangerous place to invest, as Imaging Dynamics investors might realise.

Our data indicates that Imaging Dynamics had CA$5.5m more in total liabilities than it had cash, when it last reported in September 2019. That makes it extremely high risk, in our view. But with the share price diving 49% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Imaging Dynamics's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

TSXV:IDL Historical Debt April 4th 2020

Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

A Different Perspective

It's good to see that Imaging Dynamics has rewarded shareholders with a total shareholder return of 33% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 31% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Imaging Dynamics better, we need to consider many other factors. Case in point: We've spotted 6 warning signs for Imaging Dynamics you should be aware of, and 4 of them can't be ignored.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.