Did Changing Sentiment Drive Mainstay Medical International's (EPA:MSTY) Share Price Down A Painful 76%?
Over the last month the Mainstay Medical International plc (EPA:MSTY) has been much stronger than before, rebounding by 35%. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. In fact, the share price has tumbled down a mountain to land 76% lower after that period. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The million dollar question is whether the company can justify a long term recovery.
See our latest analysis for Mainstay Medical International
We don't think Mainstay Medical International's revenue of US$663,000 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Mainstay Medical International 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 such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Mainstay Medical International has already given some investors a taste of the bitter losses that high risk investing can cause.
Mainstay Medical International had liabilities exceeding cash by US$552,000 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. But with the share price diving 25% 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 Mainstay Medical International's cash levels have changed over time (click to see the values). You can see in the image below, how Mainstay Medical International's cash levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. Would it bother you if insiders were selling the stock? 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
Investors in Mainstay Medical International had a tough year, with a total loss of 75%, against a market gain of about 6.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 25% 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 businesses. You could get a better understanding of Mainstay Medical International's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: Mainstay Medical International may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR exchanges.
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.
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. Thank you for reading.
