It's not a secret that every investor will make bad investments, from time to time. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. So spare a thought for the long term shareholders of NeutriSci International Inc. (CVE:NU); the share price is down a whopping 76% in the last twelve months. That'd be enough to make even the strongest stomachs churn. Notably, shareholders had a tough run over the longer term, too, with a drop of 65% in the last three years. Furthermore, it's down 21% in about a quarter. That's not much fun for holders.
We don't think NeutriSci International's revenue of CA$106,680 is enough to establish significant demand. 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 NeutriSci International 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. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Some NeutriSci International investors have already had a taste of the bitterness stocks like this can leave in the mouth.
NeutriSci International had cash in excess of all liabilities of just CA$177k when it last reported (June 2019). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 76% in the last year . You can see in the image below, how NeutriSci International's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how NeutriSci International's cash levels have changed over time.
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? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
NeutriSci International shareholders are down 76% for the year, but the broader market is up 1.5%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 29% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Before spending more time on NeutriSci International it might be wise to click here to see if insiders have been buying or selling shares.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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