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Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Arcimoto, Inc. (NASDAQ:FUV) share price slid 25% over twelve months. That's well bellow the market return of 6.2%. Arcimoto hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 20% in the last three months.
Arcimoto recorded just US$96,985 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. It seems likely some shareholders believe that Arcimoto will significantly advance the business plan 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. 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.
Our data indicates that Arcimoto had US$1,333,744 more in total liabilities than it had cash, when it last reported in March 2019. That puts it in the highest risk category, according to our analysis. But with the share price diving 25% in the last year, it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how Arcimoto's cash levels have changed over time (click to see the values). You can see in the image below, how Arcimoto's cash levels have changed over time (click to see the values).
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? 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
While Arcimoto shareholders are down 25% for the year, the market itself is up 6.2%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 20%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Arcimoto by clicking this link.
Arcimoto 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.
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 email@example.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.