Volatility 101: Should Quantum Genomics Société Anonyme (EPA:ALQGC) Shares Have Dropped 41%?

Over the last month the Quantum Genomics Société Anonyme (EPA:ALQGC) has been much stronger than before, rebounding by 33%. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 41% in that time, significantly under-performing the market.

See our latest analysis for Quantum Genomics Société Anonyme

With zero revenue generated over twelve months, we don't think that Quantum Genomics Société Anonyme has proved its business plan yet. You have to wonder why venture capitalists aren't funding it. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. For example, they may be hoping that Quantum Genomics Société Anonyme comes up with a great new product, before it runs out of money.

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. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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).

When it reported in June 2019 Quantum Genomics Société Anonyme had minimal cash in excess of all liabilities consider its expenditure: just €6.1m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 10% per year, over 5 years . You can click on the image below to see (in greater detail) how Quantum Genomics Société Anonyme's cash levels have changed over time. You can click on the image below to see (in greater detail) how Quantum Genomics Société Anonyme's cash levels have changed over time.

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? 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

Quantum Genomics Société Anonyme shareholders are down 10% for the year, but the market itself is up 26%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 10% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 7 warning signs with Quantum Genomics Société Anonyme (at least 3 which don't sit too well with us) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR exchanges.

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.

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. Thank you for reading.