U.S. Markets open in 5 hrs 8 mins

Introducing Contagious Gaming (CVE:CNS), The Stock That Tanked 95%

Simply Wall St

It is a pleasure to report that the Contagious Gaming Inc. (CVE:CNS) is up 57% in the last quarter. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 95% in that time. So it's about time shareholders saw some gains. Of course the real question is whether the business can sustain a turnaround.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

View our latest analysis for Contagious Gaming

We don't think Contagious Gaming's revenue of CA$483,983 is enough to establish significant demand. 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. It seems likely some shareholders believe that Contagious Gaming 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 do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Some Contagious Gaming investors have already had a taste of the bitterness stocks like this can leave in the mouth.

Contagious Gaming had liabilities exceeding cash by CA$904,077 when it last reported in December 2018, according to our data. That puts it in the highest risk category, according to our analysis. But since the share price has dived -62% 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 Contagious Gaming's cash levels have changed over time. You can see in the image below, how Contagious Gaming's cash levels have changed over time (click to see the values).

TSXV:CNS Historical Debt, July 30th 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? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.

A Different Perspective

It's nice to see that Contagious Gaming shareholders have gained 38% (in total) over the last year. What is absolutely clear is that is far preferable to the dismal 62% average annual loss suffered over the last three years. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. You could get a better understanding of Contagious Gaming's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Of course Contagious Gaming 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.

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.