Every investor on earth makes bad calls sometimes. But really big losses can really drag down an overall portfolio. So consider, for a moment, the misfortune of Diurnal Group plc (LON:DNL) investors who have held the stock for three years as it declined a whopping 71%. That would be a disturbing experience. On top of that, the share price has dropped a further 14% in a month.
Check out our latest analysis for Diurnal Group
Diurnal Group recorded just UK£1,044,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Diurnal Group has the funding to invent a new product before too long.
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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Diurnal Group investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it reported in June 2019 Diurnal Group had minimal cash in excess of all liabilities consider its expenditure: just UK£6.6m to be specific. 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 34% per year, over 3 years . You can click on the image below to see (in greater detail) how Diurnal Group's cash levels have changed over time. You can click on the image below to see (in greater detail) how Diurnal Group's cash levels have changed over time.
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. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.
A Different Perspective
Pleasingly, Diurnal Group's total shareholder return last year was 24%. What is absolutely clear is that is far preferable to the dismal 34% average annual loss suffered over the last three years. It could well be that the business has turned around -- or else regained the confidence of investors. If you would like to research Diurnal Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.