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This week we saw the CCP Technologies Limited (ASX:CT1) share price climb by 17%. But that's not enough to compensate for the decline over the last twelve months. During that time the share price has sank like a stone, descending 56%. It's not that amazing to see a bounce after a drop like that. Arguably, the fall was overdone.
We don't think CCP Technologies's revenue of AU$532,320 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? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that CCP Technologies will significantly advance the business plan before too long.
Companies that lack both meaningful revenue and profits are usually considered 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. CCP Technologies has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that CCP Technologies had net debt of AU$383,574 when it last reported in December 2018. That puts it in the highest risk category, according to our analysis. But with the share price diving 56% 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 CCP Technologies's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? 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
Given that the market gained 8.8% in the last year, CCP Technologies shareholders might be miffed that they lost 56%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 36% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
Of course CCP Technologies 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 AU 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.