As every investor would know, you don't hit a homerun every time you swing. But it's not unreasonable to try to avoid truly shocking capital losses. So spare a thought for the long term shareholders of Wattle Health Australia Limited (ASX:WHA); the share price is down a whopping 70% in the last twelve months. That'd be enough to make even the strongest stomachs churn. Because Wattle Health Australia hasn't been listed for many years, the market is still learning about how the business performs. Furthermore, it's down 39% in about a quarter. That's not much fun for holders.
Check out our latest analysis for Wattle Health Australia
We don't think Wattle Health Australia's revenue of AU$1,372,000 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 Wattle Health Australia can make progress and gain better traction for the business, before it runs low on cash.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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. It certainly is a dangerous place to invest, as Wattle Health Australia investors might realise.
When it last reported its balance sheet in December 2018, Wattle Health Australia had cash in excess of all liabilities of AU$38m. While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. We'd venture that shareholders are concerned about the need for more capital, because the share price has dropped 70% in the last year. You can click on the image below to see (in greater detail) how Wattle Health Australia's cash levels have changed over time. You can see in the image below, how Wattle Health Australia's cash levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. Would it bother you if insiders were selling the 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.