We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. Anyone who held Fission 3.0 Corp. (CVE:FUU) for five years would be nursing their metaphorical wounds since the share price dropped 78% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 29% over the last twelve months. Furthermore, it's down 23% in about a quarter. That's not much fun for holders.
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With zero revenue generated over twelve months, we don't think that Fission 3.0 has proved its business plan yet. 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 Fission 3.0 will discover or develop fossil fuel 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. It certainly is a dangerous place to invest, as Fission 3.0 investors might realise.
Fission 3.0 has plenty of cash in the bank, with cash in excess of all liabilities sitting at CA$6.5m, when it last reported (December 2018). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But with the share price diving 26% per year, over 5 years, it could be that the price was previously too hyped up. The image below shows how Fission 3.0's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Fission 3.0 shareholders are down 29% for the year, but the market itself is up 1.6%. 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 26% 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. If you would like to research Fission 3.0 in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 CA exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.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.