This month, we saw the Amoéba S.A. (EPA:AMEBA) up an impressive 108%. But only the myopic could ignore the astounding decline over three years. Indeed, the share price is down a whopping 87% in the last three years. So it sure is nice to see a bit of an improvement. Only time will tell if the company can sustain the turnaround.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Amoéba recorded just €122,480 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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). It seems likely some shareholders believe that Amoéba 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 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 Amoéba investors might realise.
Our data indicates that Amoéba had €4.9m more in total liabilities than it had cash, when it last reported in December 2019. That makes it extremely high risk, in our view. But since the share price has dived -49% per year, over 3 years , it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Amoéba's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
We're pleased to report that Amoéba rewarded shareholders with a total shareholder return of 9.3% over the last year. That certainly beats the loss of about 49% per year over three years. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. 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. Even so, be aware that Amoéba is showing 6 warning signs in our investment analysis , and 3 of those can't be ignored...
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 FR exchanges.
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