The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it should be a priority to avoid stomach churning catastrophes, wherever possible. It must have been painful to be a Bidstack Group Plc (LON:BIDS) shareholder over the last year, since the stock price plummeted 71% in that time. That'd be a striking reminder about the importance of diversification. Because Bidstack Group hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 68% in the last 90 days. But this could be related to the weak market, which is down 30% in the same period.
Check out our latest analysis for Bidstack Group
We don't think Bidstack Group's revenue of UK£343,598 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Bidstack Group 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. 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). Some Bidstack Group investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Bidstack Group had cash in excess of all liabilities of UK£5.6m when it last reported (June 2019). 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. We'd venture that shareholders are concerned about the need for more capital, because the share price has dropped 71% in the last year. The image below shows how Bidstack Group's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the 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
Bidstack Group shareholders are down 71% for the year, even worse than the market loss of 22%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 68% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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 Bidstack Group (at least 4 which are concerning) , 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 GB 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.
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. Thank you for reading.
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March 18, 2020 at 12:19PM
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Easy Come, Easy Go: How Bidstack Group (LON:BIDS) Shareholders Got Unlucky And Saw 71% Of Their Cash Evaporate - Yahoo Finance
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