MyFiziq Limited (ASX:MYQ) shareholders might be concerned after seeing the share price drop 25% in the last month. But over three years the performance has been really wonderful. In fact, the share price has taken off in that time, up 389%. So the recent fall doesn't do much to dampen our respect for the business. Only time will tell if there is still too much optimism currently reflected in the share price.
MyFiziq recorded just AU$154,851 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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. Investors will be hoping that MyFiziq can make progress and gain better traction for the business, before it runs low on cash.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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 MyFiziq investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.
MyFiziq had liabilities exceeding cash by AU$1.5m when it last reported in June 2019, according to our data. That makes it extremely high risk, in our view. So the fact that the stock is up 50% per year, over 3 years shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. The image below shows how MyFiziq'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 MyFiziq's cash levels have changed over time (click to see the values).
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, many of the best investors like to check if insiders have been buying shares. If they are buying a significant amount of shares, that's certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
The last twelve months weren't great for MyFiziq shares, which cost holders 31%, while the market was up about 25%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 70% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - MyFiziq has 7 warning signs (and 3 which shouldn't be ignored) we think you should know about.
Of course MyFiziq 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 AU exchanges.
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.
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. Thank you for reading.