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Fortune Bay Corp. (CVE:FOR) shareholders will doubtless be very grateful to see the share price up 63% in the last quarter. But that doesn't change the reality of under-performance over the last twelve months. In fact, the price has declined 11% in a year, falling short of the returns you could get by investing in an index fund.
Fortune Bay didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, investors may be hoping that Fortune Bay finds some valuable resources, before it runs out of money.
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 almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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.
Fortune Bay had liabilities exceeding cash by CA$501,802 when it last reported in March 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 11% in the last year, it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Fortune Bay'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling 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
Given that the market gained 1.6% in the last year, Fortune Bay shareholders might be miffed that they lost 11%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. Putting aside the last twelve months, it's good to see the share price has rebounded by 63%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
But note: Fortune Bay 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 CA 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 firstname.lastname@example.org. 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.