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Volatility 101: Should Quantum Genomics Société Anonyme (EPA:ALQGC) Shares Have Dropped 48%?

Simply Wall St

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Quantum Genomics Société Anonyme (EPA:ALQGC), since the last five years saw the share price fall 48%. And we doubt long term believers are the only worried holders, since the stock price has declined 25% over the last twelve months. The last week also saw the share price slip down another 11%.

Check out our latest analysis for Quantum Genomics Société Anonyme

Quantum Genomics Société Anonyme didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Quantum Genomics Société Anonyme has the funding to invent a new product before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. 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 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).

When it reported in June 2019 Quantum Genomics Société Anonyme had minimal cash in excess of all liabilities consider its expenditure: just €6.1m 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 12% per year, over 5 years . You can see in the image below, how Quantum Genomics Société Anonyme's cash levels have changed over time (click to see the values). You can see in the image below, how Quantum Genomics Société Anonyme's cash levels have changed over time (click to see the values).

ENXTPA:ALQGC Historical Debt, February 2nd 2020

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.

A Different Perspective

Quantum Genomics Société Anonyme shareholders are down 25% for the year, but the market itself is up 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality business. 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. Take risks, for example - Quantum Genomics Société Anonyme has 6 warning signs (and 3 which are a bit unpleasant) we think you should know about.

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 FR 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.