The Sproutly Canada (CNSX:SPR) Share Price Is Down 38% So Some Shareholders Are Getting Worried

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Sproutly Canada Inc. (CNSX:SPR) share price slid 38% over twelve months. That falls noticeably short of the market return of around 12%. Sproutly Canada hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. In the last ninety days we've seen the share price slide 45%.

See our latest analysis for Sproutly Canada

Sproutly Canada recorded just CA$133,832 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Sproutly Canada will significantly advance the business plan before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing.

Sproutly Canada had liabilities exceeding cash by CA$10m when it last reported in August 2019, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 38% in the last year , it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Sproutly Canada's cash levels have changed over time. You can see in the image below, how Sproutly Canada's cash levels have changed over time.

Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? 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

Given that the market gained 12% in the last year, Sproutly Canada shareholders might be miffed that they lost 38%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's worth noting that the last three months did the real damage, with a 45% decline. So it seems like some holders have been dumping the stock of late - and that's not bullish. You could get a better understanding of Sproutly Canada's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

But note: Sproutly Canada 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 CA 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.