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The nature of investing is that you win some, and you lose some. And there's no doubt that Nanoveu Limited (ASX:NVU) stock has had a really bad year. The share price has slid 60% in that time. Nanoveu hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it's down 33% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 23% in the same timeframe.
Check out our latest analysis for Nanoveu
We don't think Nanoveu's revenue of AU$61,023 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. 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 Nanoveu can make progress and gain better traction for the business, before it runs low on cash.
Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Nanoveu has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in December 2019 Nanoveu had minimal cash in excess of all liabilities consider its expenditure: just AU$1.6m 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 60% in the last year. You can see in the image below, how Nanoveu'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
We doubt Nanoveu shareholders are happy with the loss of 60% over twelve months. That falls short of the market, which lost 11%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 33%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Nanoveu better, we need to consider many other factors. Even so, be aware that Nanoveu is showing 7 warning signs in our investment analysis , and 5 of those are concerning...