RESAAS Services Inc. (CVE:RSS) shareholders will doubtless be very grateful to see the share price up 84% in the last quarter. But only the myopic could ignore the astounding decline over three years. Indeed, the share price is down a whopping 79% in the last three years. So it's about time shareholders saw some gains. Only time will tell if the company can sustain the turnaround.
With just CA$848,012 worth of revenue in twelve months, we don't think the market considers RESAAS Services to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that RESAAS Services 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 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). It certainly is a dangerous place to invest, as RESAAS Services investors might realise.
RESAAS Services had liabilities exceeding cash by CA$710k when it last reported in September 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 41% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how RESAAS Services's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can click on the image below to see (in greater detail) how RESAAS Services'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. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
It's nice to see that RESAAS Services shareholders have gained 40% (in total) over the last year. What is absolutely clear is that is far preferable to the dismal 41% average annual loss suffered over the last three years. It could well be that the business has turned around -- or else regained the confidence of investors. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - RESAAS Services has 6 warning signs (and 2 which shouldn't be ignored) we think you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.