Those Who Purchased AFC Energy (LON:AFC) Shares Five Years Ago Have A 80% Loss To Show For It
Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Imagine if you held AFC Energy plc (LON:AFC) for half a decade as the share price tanked 80%. And some of the more recent buyers are probably worried, too, with the stock falling 53% in the last year. And the share price decline continued over the last week, dropping some 15%.
Check out our latest analysis for AFC Energy
With zero revenue generated over twelve months, we don't think that AFC Energy has proved its business plan yet. 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. Investors will be hoping that AFC Energy can make progress and gain better traction for the business, before it runs low on cash.
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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. AFC Energy has already given some investors a taste of the bitter losses that high risk investing can cause.
AFC Energy had cash in excess of all liabilities of just UK£887k when it last reported (April 2019). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 27% per year, over 5 years. You can click on the image below to see (in greater detail) how AFC Energy's cash levels have changed over time. The image below shows how AFC Energy's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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, 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
We regret to report that AFC Energy shareholders are down 53% for the year. Unfortunately, that's worse than the broader market decline of 2.4%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 27% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
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 GB exchanges.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.
