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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Fluicell AB (publ) (STO:FLUI) have tasted that bitter downside in the last year, as the share price dropped 35%. That falls noticeably short of the market return of around 7.2%. Fluicell hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Even worse, it's down 11% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
View our latest analysis for Fluicell
We don't think Fluicell's revenue of kr1,816,000 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Fluicell will significantly advance the business plan 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 Fluicell had minimal cash in excess of all liabilities consider its expenditure: just kr10m 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 35% in the last year. You can see in the image below, how Fluicell's cash levels have changed over time (click to see the values). You can see in the image below, how Fluicell's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. 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.