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As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of AquaBounty Technologies, Inc. (NASDAQ:AQB) investors who have held the stock for three years as it declined a whopping 78%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And the ride hasn't got any smoother in recent times over the last year, with the price 23% lower in that time. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days. But this could be related to the weak market, which is down 15% in the same period.
We don't think AquaBounty Technologies's revenue of US$186,738 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? 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 AquaBounty Technologies has the funding to invent a new product 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 the company needed to issue more shares recently so that it could raise enough money to continue pursuing its business plan. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as AquaBounty Technologies investors might realise.
Our data indicates that AquaBounty Technologies had more in total liabilities than it had cash, when it last reported. That put it in the highest risk category, according to our analysis. But with the share price diving 40% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed or they are worried about dilution with the recent cash injection. You can click on the image below to see (in greater detail) how AquaBounty Technologies's cash levels have changed over time.
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. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
AquaBounty Technologies shareholders are down 23% for the year, falling short of the market return. Meanwhile, the broader market slid about 0.8%, likely weighing on the stock. Unfortunately, the longer term story isn't pretty, with investment losses running at 40% per year over three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand AquaBounty Technologies better, we need to consider many other factors. Case in point: We've spotted 6 warning signs for AquaBounty Technologies you should be aware of, and 3 of them are a bit concerning.
AquaBounty Technologies is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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