Investors in Spectral Medical (TSE:EDT) from a year ago are still down 43%, even after 11% gain this past week
This week we saw the Spectral Medical Inc. (TSE:EDT) share price climb by 11%. But in truth the last year hasn't been good for the share price. After all, the share price is down 43% in the last year, significantly under-performing the market.
On a more encouraging note the company has added CA$8.4m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.
View our latest analysis for Spectral Medical
With just CA$1,713,000 worth of revenue in twelve months, we don't think the market considers Spectral Medical to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Spectral Medical comes up with a great new product, before it runs out of money.
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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
Spectral Medical had liabilities exceeding cash by CA$8.4m when it last reported in March 2023, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 43% in the last year , it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Spectral Medical's cash levels have changed over time.
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? 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
Spectral Medical shareholders are down 43% for the year, but the market itself is up 9.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Spectral Medical better, we need to consider many other factors. For example, we've discovered 8 warning signs for Spectral Medical (3 are concerning!) that you should be aware of before investing here.
Spectral Medical 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 Canadian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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