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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. It must have been painful to be a Blockchain Foundry Inc. (CNSX:BCFN) shareholder over the last year, since the stock price plummeted 71% in that time. That’d be a striking reminder about the importance of diversification. Blockchain Foundry hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. On top of that, the share price has dropped a further 25% in a month.
With just CA$189,787 worth of revenue in twelve months, we don’t think the market considers Blockchain Foundry to have proven its business plan. 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). Investors will be hoping that Blockchain Foundry 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 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 Blockchain Foundry investors might realise.
Our data indicates that Blockchain Foundry had CA$289,978 more in total liabilities than it had cash, when it last reported in March 2019. That makes it extremely high risk, in our view. But since the share price has dived -71% in the last year, it looks like some investors think it’s time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Blockchain Foundry’s cash levels have changed over time.
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. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
While Blockchain Foundry shareholders are down 71% for the year, the market itself is up 0.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 14% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before spending more time on Blockchain Foundry it might be wise to click here to see if insiders have been buying or selling shares.
Of course Blockchain Foundry may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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.
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.