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Even the best stock pickers will make plenty of bad investments. Unfortunately, shareholders of Cambridge Chocolate Technologies S.A. (WSE:CAM) have suffered share price declines over the last year. The share price has slid 53% in that time. We wouldn't rush to judgement on Cambridge Chocolate Technologies because we don't have a long term history to look at. Furthermore, it's down 30% in about a quarter. That's not much fun for holders.
Cambridge Chocolate Technologies recorded just zł1,509,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. You have to wonder why venture capitalists aren't funding it. 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. Investors will be hoping that Cambridge Chocolate Technologies can make progress and gain better traction for the business, before it runs low on cash.
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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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. Some Cambridge Chocolate Technologies investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Cambridge Chocolate Technologies had liabilities exceeding cash by zł9,704,000 when it last reported in September 2018, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -53% in the last year, it looks like some investors think it's time to abandon ship, so to speak. The image below shows how Cambridge Chocolate Technologies'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? 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
Cambridge Chocolate Technologies shareholders are down 53% for the year, even worse than the market loss of 3.7%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 30% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
Of course Cambridge Chocolate 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 PL 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.