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It hasn't been the best quarter for DeepMatter Group Plc (LON:DMTR) shareholders, since the share price has fallen 23% in that time. But don't let that distract from the very nice return generated over three years. In the last three years the share price is up, 93%: better than the market.
Check out our latest analysis for DeepMatter Group
DeepMatter Group hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. 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. Investors will be hoping that DeepMatter Group can make progress and gain better traction for the business, before it runs low on cash.
We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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. Some DeepMatter Group investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.
When it reported in December 2018 DeepMatter Group had minimal cash in excess of all liabilities consider its expenditure: just UK£741k to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. It's a testament to the popularity of the business plan that the share price gained 24% per year, over 3 years, despite the weak balance sheet. You can click on the image below to see (in greater detail) how DeepMatter Group's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
Investors in DeepMatter Group had a tough year, with a total loss of 25%, against a market gain of about 0.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.6% 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. You could get a better understanding of DeepMatter Group's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.