Yahoo Finance Did Changing Sentiment Drive Avacta Group's (LON:AVCT) Share Price Down A Painful 79%?
As every investor would know, not every swing hits the sweet spot. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Avacta Group Plc (LON:AVCT); the share price is down a whopping 79% in the last three years. That'd be enough to cause even the strongest minds some disquiet. The falls have accelerated recently, with the share price down 31% in the last three months.
Check out our latest analysis for Avacta Group
With just UK£2,269,000 worth of revenue in twelve months, we don't think the market considers Avacta Group to have proven its business plan. 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 Avacta Group has the funding to invent a new product before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Some Avacta Group investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Avacta Group had cash in excess of all liabilities of UK£8.0m when it last reported (January 2019). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price down 41% per year, over 3 years, it seems likely that the need for cash is weighing on investors' minds. The image below shows how Avacta Group's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can click on the image below to see (in greater detail) how Avacta Group's cash levels have changed over time.
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'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Avacta Group shareholders are down 20% for the year, but the market itself is up 4.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 25% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Before spending more time on Avacta Group it might be wise to click here to see if insiders have been buying or selling shares.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.
