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Did You Manage To Avoid SenesTech's (NASDAQ:SNES) 95% Share Price Wipe Out?

Simply Wall St
·4 mins read

As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of SenesTech, Inc. (NASDAQ:SNES) investors who have held the stock for three years as it declined a whopping 95%. That would be a disturbing experience. And more recent buyers are having a tough time too, with a drop of 53% in the last year. Shareholders have had an even rougher run lately, with the share price down 41% in the last 90 days.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Check out our latest analysis for SenesTech

We don't think SenesTech's revenue of US$216,000 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that SenesTech will significantly advance the business plan before too long.

We think companies that have neither significant revenues nor profits are pretty high risk. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. SenesTech has already given some investors a taste of the bitter losses that high risk investing can cause.

SenesTech had cash in excess of all liabilities of just US$2.5m when it last reported (September 2019). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 63% per year, over 3 years . You can click on the image below to see (in greater detail) how SenesTech's cash levels have changed over time. You can click on the image below to see (in greater detail) how SenesTech's cash levels have changed over time.

NasdaqCM:SNES Historical Debt, January 28th 2020
NasdaqCM:SNES Historical Debt, January 28th 2020

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? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

The last twelve months weren't great for SenesTech shares, which cost holders 53%, while the market was up about 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 63% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 6 warning signs for SenesTech (2 are a bit concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.