Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Catenae Innovation Plc (LON:CTEA) during the five years that saw its share price drop a whopping 91%. And we doubt long term believers are the only worried holders, since the stock price has declined 52% over the last twelve months. The falls have accelerated recently, with the share price down 39% in the last three months.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
Check out our latest analysis for Catenae Innovation
Catenae Innovation recorded just UK£15,851 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? 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 Catenae Innovation can make progress and gain better traction for the business, before it runs low on cash.
Companies that lack both meaningful revenue and profits are usually considered 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Catenae Innovation has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that Catenae Innovation had net debt of UK£863,835 when it last reported in March 2018. That makes it extremely high risk, in our view. But with the share price diving 39% per year, over 5 years, it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Catenae Innovation's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.