The nature of investing is that you win some, and you lose some. Unfortunately, shareholders of Patriot One Technologies Inc. (TSE:PAT) have suffered share price declines over the last year. The share price is down a hefty 65% in that time. At least the damage isn’t so bad if you look at the last three years, since the stock is down 6.8% in that time. Furthermore, it’s down 52% in about a quarter. That’s not much fun for holders.
We don’t think Patriot One Technologies’s revenue of CA$518,591 is enough to establish significant demand. You have to wonder why venture capitalists aren’t funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that Patriot One Technologies can make progress and gain better traction for the business, before it runs low on cash.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as Patriot One Technologies investors might realise.
Patriot One Technologies had cash in excess of all liabilities of just CA$28m when it last reported (January 2020). 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 65% in the last year. You can see in the image below, how Patriot One Technologies’s cash levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn’t even have revenue. There’s no way to know its value easily. 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
Patriot One Technologies shareholders are down 65% for the year, falling short of the market return. Meanwhile, the broader market slid about 11%, likely weighing on the stock. The three-year loss of 2.3% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to “buy when there’s blood in the streets, even if the blood is your own”, he also focusses on high quality stocks with solid prospects. It’s always interesting to track share price performance over the longer term. But to understand Patriot One Technologies better, we need to consider many other factors. For example, we’ve discovered 6 warning signs for Patriot One Technologies (2 are concerning!) that you should be aware of before investing here.
Patriot One Technologies is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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.
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