Shareholders in AquaBounty Technologies (NASDAQ:AQB) are in the red if they invested five years ago
Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding AquaBounty Technologies, Inc. (NASDAQ:AQB) during the five years that saw its share price drop a whopping 81%. And we doubt long term believers are the only worried holders, since the stock price has declined 69% over the last twelve months. More recently, the share price has dropped a further 20% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
View our latest analysis for AquaBounty Technologies
AquaBounty Technologies recorded just US$2,905,654 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that AquaBounty Technologies 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 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 AquaBounty Technologies investors might realise.
When it last reported its balance sheet in June 2022, AquaBounty Technologies had cash in excess of all liabilities of US$132m. That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 13% per year, over 5 years , it seems likely that the need for cash is weighing on investors' minds. The image below shows how AquaBounty Technologies' balance sheet has changed over time; if you want to see the precise values, simply click on the image.
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While the broader market lost about 9.3% in the twelve months, AquaBounty Technologies shareholders did even worse, losing 69%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% 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. 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. Even so, be aware that AquaBounty Technologies is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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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