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Imagine Owning OpenDNA (ASX:OPN) And Trying To Stomach The 74% Share Price Drop

Simply Wall St

Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of OpenDNA Limited (ASX:OPN), who have seen the share price tank a massive 74% over a three year period. That'd be enough to cause even the strongest minds some disquiet. It's up 15% in the last seven days.

View our latest analysis for OpenDNA

OpenDNA recorded just AU$705,630 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 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 OpenDNA will significantly advance the business plan before too long.

We think companies that have neither significant revenues nor profits are pretty 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 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 OpenDNA investors have already had a taste of the bitterness stocks like this can leave in the mouth.

When it reported in June 2019 OpenDNA had minimal cash in excess of all liabilities consider its expenditure: just AU$820k to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 36% per year, over 3 years . The image below shows how OpenDNA's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how OpenDNA's cash levels have changed over time (click to see the values).

ASX:OPN Historical Debt, November 16th 2019

Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? 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

We're pleased to report that OpenDNA rewarded shareholders with a total shareholder return of 34% over the last year. That certainly beats the loss of about 36% per year over three years. It could well be that the business has turned around -- or else regained the confidence of investors. Before spending more time on OpenDNA it might be wise to click here to see if insiders have been buying or selling shares.

But note: OpenDNA may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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 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. Thank you for reading.