The Cambridge Chocolate Technologies (WSE:CAM) Share Price Is Down 85% So Some Shareholders Are Rather Upset

By
Simply Wall St
Published
February 27, 2020
WSE:ETN
Source: Shutterstock

Over the last month the Cambridge Chocolate Technologies S.A. (WSE:CAM) has been much stronger than before, rebounding by 60%. But that doesn't change the fact that the returns over the last year have been stomach churning. Specifically, the stock price nose-dived 85% in that time. So the rise may not be much consolation. The bigger issue is whether the company can sustain the momentum in the long term.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

View our latest analysis for Cambridge Chocolate Technologies

Cambridge Chocolate Technologies recorded just zł978,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that Cambridge Chocolate Technologies can make progress and gain better traction for the business, before it runs low on cash.

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 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 Cambridge Chocolate Technologies investors might realise.

Cambridge Chocolate Technologies had liabilities exceeding cash by zł12m when it last reported in September 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -85% in the last year , it looks like some investors think it's time to abandon ship, so to speak. The image below shows how Cambridge Chocolate Technologies'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 Cambridge Chocolate Technologies's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

WSE:CAM Historical Debt, February 28th 2020
WSE:CAM Historical Debt, February 28th 2020

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. 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 only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

Cambridge Chocolate Technologies shareholders are down 85% for the year, even worse than the market loss of 15%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 68% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 6 warning signs we've spotted with Cambridge Chocolate Technologies (including 4 which is shouldn't be ignored) .

But note: Cambridge Chocolate Technologies 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 PL 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.

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