BTC Studios (WSE:BTC) pulls back 12% this week, but still delivers shareholders solid 26% CAGR over 3 years

Investors are understandably disappointed when a stock they own declines in value. But it can difficult to make money in a declining market. The BTC Studios S.A. (WSE:BTC) is down 90% over three years, but the total shareholder return is 100% once you include the dividend. And that total return actually beats the market return of 32%. Furthermore, it's down 19% in about a quarter. That's not much fun for holders. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for BTC Studios

BTC Studios recorded just zł431,787 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. It seems likely some shareholders believe that BTC Studios 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. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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). BTC Studios has already given some investors a taste of the bitter losses that high risk investing can cause.

Our data indicates that BTC Studios had zł1.8m more in total liabilities than it had cash, when it last reported in September 2023. That makes it extremely high risk, in our view. But with the share price diving 24% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed. The image below shows how BTC Studios' balance sheet has changed over time; if you want to see the precise values, simply click on the image.

In reality it's hard to have much certainty when valuing a business that has neither 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 only takes a moment for you to check whether we have identified any insider sales recently.

What About The Total Shareholder Return (TSR)?

We've already covered BTC Studios' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that BTC Studios' TSR, at 100% is higher than its share price return of -90%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

Investors in BTC Studios had a tough year, with a total loss of 19%, against a market gain of about 37%. 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. On the bright side, long term shareholders have made money, with a gain of 53% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand BTC Studios better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for BTC Studios you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.