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Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Preferred Dental Technologies Inc. (CNSX:PDTI) shareholders over the last year, as the share price declined 20%. That contrasts poorly with the market return of 2.5%. Preferred Dental Technologies may have better days ahead, of course; we've only looked at a one year period. And the share price decline continued over the last week, dropping some 20%.
View our latest analysis for Preferred Dental Technologies
With zero revenue generated over twelve months, we don't think that Preferred Dental Technologies has proved its business plan yet. 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 Preferred Dental Technologies will significantly advance the business plan 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 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).
Our data indicates that Preferred Dental Technologies had CA$1,161,786 more in total liabilities than it had cash, when it last reported in January 2019. That makes it extremely high risk, in our view. But since the share price has dived -20% in the last year, it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Preferred Dental Technologies's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.