Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in A and M Jumbo Bags Limited (NSE:AMJUMBO) have tasted that bitter downside in the last year, as the share price dropped 49%. That falls noticeably short of the market return of around -0.6%. We wouldn't rush to judgement on A and M Jumbo Bags because we don't have a long term history to look at. Even worse, it's down 21% in about a month, which isn't fun at all.
View our latest analysis for A and M Jumbo Bags
A and M Jumbo Bags recorded just ₹61,539,477 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. You have to wonder why venture capitalists aren't funding it. 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. Investors will be hoping that A and M Jumbo Bags 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing.
When it reported in March 2018 A and M Jumbo Bags had minimal net cash consider its expenditure: just ₹8.6m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 49% in the last year. You can see in the image below, how A and M Jumbo Bags's cash and debt levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
We doubt A and M Jumbo Bags shareholders are happy with the loss of 49% over twelve months. That falls short of the market, which lost 0.6%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 14% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Before deciding if you like the current share price, check how A and M Jumbo Bags scores on these 3 valuation metrics.