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It’s not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. So spare a thought for the long term shareholders of Imagination Park Technologies Inc. (CNSX:IP); the share price is down a whopping 86% in the last twelve months. A loss like this is a stark reminder that portfolio diversification is important. At least the damage isn’t so bad if you look at the last three years, since the stock is down 9.1% in that time. It’s down 17% in the last seven days.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Imagination Park Technologies recorded just CA$500,921 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. 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. It seems likely some shareholders believe that Imagination Park Technologies will significantly advance the business plan before too long.
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). Some Imagination Park Technologies investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Our data indicates that Imagination Park Technologies had CA$813,907 more in total liabilities than it had cash, when it last reported in February 2019. That puts it in the highest risk category, according to our analysis. But with the share price diving 86% in the last year, it’s probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how Imagination Park Technologies’s cash levels have changed over time (click to see the values).
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? 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
Imagination Park Technologies shareholders are down 86% for the year, but the market itself is up 0.7%. 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. Longer term investors wouldn’t be so upset, since they would have made 2.1%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 Imagination Park Technologies by clicking this link.
Imagination Park Technologies 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 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 firstname.lastname@example.org. 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.