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Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding AquaBounty Technologies, Inc. (NASDAQ:AQB) during the five years that saw its share price drop a whopping 81%. And we doubt long term believers are the only worried holders, since the stock price has declined 69% over the last twelve months. More recently, the share price has dropped a further 20% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
View our latest analysis for AquaBounty Technologies
AquaBounty Technologies recorded just US$2,905,654 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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. For example, they may be hoping that AquaBounty Technologies comes up with a great new product, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty 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 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). It certainly is a dangerous place to invest, as AquaBounty Technologies investors might realise.
When it last reported its balance sheet in June 2022, AquaBounty Technologies had cash in excess of all liabilities of US$132m. That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 13% per year, over 5 years , it seems likely that the need for cash is weighing on investors' minds. The image below shows how AquaBounty Technologies' balance sheet has changed over time; if you want to see the precise values, simply click on the image.