As every investor would know, you don’t hit a homerun every time you swing. But serious investors should think long and hard about avoiding extreme losses. So spare a thought for the long term shareholders of Property Connect Holdings Limited (ASX:PCH); the share price is down a whopping 83% in the last twelve months. A loss like this is a stark reminder that portfolio diversification is important. We wouldn’t rush to judgement on Property Connect Holdings because we don’t have a long term history to look at. Furthermore, it’s down 33% in about a quarter. That’s not much fun for holders. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
With just AU$345,170 worth of revenue in twelve months, we don’t think the market considers Property Connect Holdings 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? 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. Investors will be hoping that Property Connect Holdings can make progress and gain better traction for the business, before it runs low on cash.
As a general rule, if a company doesn’t have much revenue, and it loses money, then it is a high risk investment. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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 Property Connect Holdings investors might realise.
Property Connect Holdings had net cash of just AU$274k when it last reported (December 2018). 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 83% in the last year. You can click on the image below to see (in greater detail) how Property Connect Holdings’s cash and debt 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. You can click here to see if there are insiders selling.
A Different Perspective
While Property Connect Holdings shareholders are down 83% for the year, the market itself is up 9.1%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 33% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. 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 Property Connect Holdings by clicking this link.
Property Connect Holdings 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 AU exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.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.