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It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. It must have been painful to be a Roots Sustainable Agricultural Technologies Ltd (ASX:ROO) shareholder over the last year, since the stock price plummeted 80% in that time. That'd be enough to make even the strongest stomachs churn. Roots Sustainable Agricultural Technologies may have better days ahead, of course; we've only looked at a one year period. Unfortunately the share price momentum is still quite negative, with prices down 25% in thirty days.
See our latest analysis for Roots Sustainable Agricultural Technologies
With just US$305,000 worth of revenue in twelve months, we don't think the market considers Roots Sustainable Agricultural Technologies to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Roots Sustainable Agricultural Technologies will significantly advance the business plan before too long.
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. Roots Sustainable Agricultural Technologies has already given some investors a taste of the bitter losses that high risk investing can cause.
Roots Sustainable Agricultural Technologies had net debt of US$262,000 when it last reported in December 2018, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 80% in the last year, it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how Roots Sustainable Agricultural Technologies'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.