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Investors Who Bought PowerBand Solutions (CVE:PBX) Shares A Year Ago Are Now Down 19%

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the PowerBand Solutions Inc. (CVE:PBX) share price is down 19% in the last year. That contrasts poorly with the market return of 3.2%. Because PowerBand Solutions hasn't been listed for many years, the market is still learning about how the business performs. The good news is that the stock is up 31% in the last week.

View our latest analysis for PowerBand Solutions

With just CA$1,297,671 worth of revenue in twelve months, we don't think the market considers PowerBand Solutions to have proven its business plan. 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 PowerBand Solutions can make progress and gain better traction for the business, before it runs low on cash.

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As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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.

Our data indicates that PowerBand Solutions had CA$1,680,071 more in total liabilities than it had cash, when it last reported in June 2019. That makes it extremely high risk, in our view. But with the share price diving 19% 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 PowerBand Solutions's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can click on the image below to see (in greater detail) how PowerBand Solutions's cash levels have changed over time.

TSXV:PBX Historical Debt, September 16th 2019
TSXV:PBX Historical Debt, September 16th 2019

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the 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.

A Different Perspective

Given that the market gained 3.2% in the last year, PowerBand Solutions shareholders might be miffed that they lost 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 31%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of PowerBand Solutions by clicking this link.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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 editorial-team@simplywallst.com. 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.