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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 consider, for a moment, the misfortune of Actinogen Medical Limited (ASX:ACW) investors who have held the stock for three years as it declined a whopping 82%. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 67% lower in that time. Shareholders have had an even rougher run lately, with the share price down 72% in the last 90 days.
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.
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Check out our latest analysis for Actinogen Medical
We don't think Actinogen Medical's revenue of AU$3,161,454 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Actinogen Medical 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 almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Actinogen Medical investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Actinogen Medical had net cash of AU$13m when it last reported (December 2018). 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 43% per year, over 3 years, it seems likely that the need for cash is weighing on investors' minds. You can click on the image below to see (in greater detail) how Actinogen Medical's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much 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. You can click here to see if there are insiders selling.