Those Who Purchased AusCann Group Holdings (ASX:AC8) Shares A Year Ago Have A 54% Loss To Show For It

AusCann Group Holdings Ltd (ASX:AC8) shareholders should be happy to see the share price up 28% in the last month. But that's small comfort given the dismal price performance over the last year. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 54% in that time. Some might say the recent bounce is to be expected after such a bad drop. You could argue that the sell-off was too severe.

Check out our latest analysis for AusCann Group Holdings

With just AU$670,606 worth of revenue in twelve months, we don't think the market considers AusCann Group Holdings to have proven its business plan. 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 AusCann Group Holdings will significantly advance the business plan before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. 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 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). It certainly is a dangerous place to invest, as AusCann Group Holdings investors might realise.

When it last reported its balance sheet in June 2019, AusCann Group Holdings could boast a strong position, with cash in excess of all liabilities of AU$34m. That allows management to focus on growing the business, and not worry too much about raising capital. But since the share price has dropped 54% in the last year , it seems like the market might have been over-excited previously. The image below shows how AusCann Group Holdings's balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how AusCann Group Holdings's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

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? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

While AusCann Group Holdings shareholders are down 54% for the year, the market itself is up 25%. 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. Putting aside the last twelve months, it's good to see the share price has rebounded by 11%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. 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. Case in point: We've spotted 6 warning signs for AusCann Group Holdings you should be aware of, and 2 of them shouldn't be ignored.

But note: AusCann Group Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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