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Did You Manage To Avoid StageZero Life Sciences's (TSE:SZLS) 97% Share Price Wipe Out?

Simply Wall St

Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held StageZero Life Sciences Ltd. (TSE:SZLS) for five whole years - as the share price tanked 97%. The falls have accelerated recently, with the share price down 41% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

See our latest analysis for StageZero Life Sciences

With just US$158,699 worth of revenue in twelve months, we don't think the market considers StageZero Life Sciences to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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. For example, they may be hoping that StageZero Life Sciences comes up with a great new product, before it runs out of money.

Companies that lack both meaningful revenue and profits are usually considered 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some StageZero Life Sciences investors have already had a taste of the bitterness stocks like this can leave in the mouth.

StageZero Life Sciences had liabilities exceeding cash by US$8.2m when it last reported in September 2019, according to our data. That puts it in the highest risk category, according to our analysis. But since the share price has dived -51% per year, over 5 years , it looks like some investors think it's time to abandon ship, so to speak. The image below shows how StageZero Life Sciences's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can click on the image below to see (in greater detail) how StageZero Life Sciences's cash levels have changed over time.

TSX:SZLS Historical Debt, November 29th 2019

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

It's good to see that StageZero Life Sciences has rewarded shareholders with a total shareholder return of 43% in the last twelve months. Notably the five-year annualised TSR loss of 51% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. Before spending more time on StageZero Life Sciences it might be wise to click here to see if insiders have been buying or selling shares.

Of course StageZero Life Sciences may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.