If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Acrebit S.A. (WSE:ACR) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 59% drop in the share price over that period. The more recent news is of little comfort, with the share price down 47% in a year. The falls have accelerated recently, with the share price down 26% in the last three months.
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View our latest analysis for Acrebit
Acrebit recorded just zł3,011,254 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). It seems likely some shareholders believe that Acrebit will significantly advance the business plan 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 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). It certainly is a dangerous place to invest, as Acrebit investors might realise.
Acrebit had cash in excess of all liabilities of zł419k when it last reported (December 2018). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price down 26% per year, over 3 years, it seems likely that the need for cash is weighing on investors' minds. You can see in the image below, how Acrebit's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. You can click here to see if there are insiders selling.
A Different Perspective
We regret to report that Acrebit shareholders are down 47% for the year. Unfortunately, that's worse than the broader market decline of 3.9%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
But note: Acrebit may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on PL exchanges.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.