Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Lokaty Budowlane S.A. (WSE:LBD) shareholders for doubting their decision to hold, with the stock down 50% over a half decade. And we doubt long term believers are the only worried holders, since the stock price has declined 42% over the last twelve months. It's down 15% in the last seven days.
View our latest analysis for Lokaty Budowlane
With just zł863,283 worth of revenue in twelve months, we don't think the market considers Lokaty Budowlane to have proven its business plan. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Lokaty Budowlane 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 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.
Lokaty Budowlane had liabilities exceeding cash by zł70,029,798 when it last reported in March 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 13% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Lokaty Budowlane's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While the broader market lost about 3.3% in the twelve months, Lokaty Budowlane shareholders did even worse, losing 42%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. 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.