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Those Who Purchased Concepta (LON:CPT) Shares Three Years Ago Have A 93% Loss To Show For It

Simply Wall St
·4 min read

Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Concepta PLC (LON:CPT), who have seen the share price tank a massive 93% over a three year period. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 55% lower in that time. Furthermore, it's down 32% in about a quarter. That's not much fun for holders.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Check out our latest analysis for Concepta

Concepta recorded just UK£20,555 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? 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 Concepta will significantly advance the business plan before too long.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Concepta has already given some investors a taste of the bitter losses that high risk investing can cause.

When it reported in June 2019 Concepta had minimal cash in excess of all liabilities consider its expenditure: just UK£1.0m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 59% per year, over 3 years . You can see in the image below, how Concepta's cash levels have changed over time (click to see the values). The image below shows how Concepta's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

AIM:CPT Historical Debt, February 20th 2020
AIM:CPT Historical Debt, February 20th 2020

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. Would it bother you if insiders were selling the stock? 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

The last twelve months weren't great for Concepta shares, which cost holders 55%, while the market was up about 12%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. However, the loss over the last year isn't as bad as the 59% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Like risks, for instance. Every company has them, and we've spotted 7 warning signs for Concepta (of which 5 are a bit concerning!) you should know about.

Of course Concepta 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 GB exchanges.

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.

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.