SportsHero Limited (ASX:SHO) shareholders should be happy to see the share price up 20% in the last month. But that doesn't change the fact that the returns over the last year have been disappointing. Like a receding glacier in a warming world, the share price has melted 70% in that period. The share price recovery is not so impressive when you consider the fall. Of course, it could be that the fall was overdone.
SportsHero recorded just US$461,749 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 SportsHero will significantly advance the business plan before too long.
Companies that lack both meaningful revenue and profits are usually considered 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). Some SportsHero investors have already had a taste of the bitterness stocks like this can leave in the mouth.
SportsHero had liabilities exceeding cash by US$1.2m when it last reported in June 2019, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 70% 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 SportsHero's cash levels have changed over time. You can see in the image below, how SportsHero's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Given that the market gained 25% in the last year, SportsHero shareholders might be miffed that they lost 70%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 28%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand SportsHero better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 6 warning signs for SportsHero (of which 3 are significant!) you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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.
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