Did Changing Sentiment Drive Simris Alg's (STO:SIMRIS B) Share Price Down A Painful 94%?
Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Simris Alg AB (publ) (STO:SIMRIS B), who have seen the share price tank a massive 94% over a three year period. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 84%, so we doubt many shareholders are delighted. Furthermore, it's down 64% in about a quarter. That's not much fun for holders.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
See our latest analysis for Simris Alg
Simris Alg recorded just kr1,743,000 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? 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 Simris Alg will significantly advance the business plan before too long.
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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Simris Alg has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that Simris Alg had kr9.2m more in total liabilities than it had cash, when it last reported in December 2019. That puts it in the highest risk category, according to our analysis. But with the share price diving 62% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how Simris Alg'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. 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
The last twelve months weren't great for Simris Alg shares, which performed worse than the market, costing holders 84%. Meanwhile, the broader market slid about 9.4%, likely weighing on the stock. The three-year loss of 60% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 6 warning signs with Simris Alg (at least 4 which are potentially serious) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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