Yahoo Finance Did Changing Sentiment Drive dorsaVi's (ASX:DVL) Share Price Down A Painful 93%?
Over the last month the dorsaVi Ltd (ASX:DVL) has been much stronger than before, rebounding by 92%. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 93% in that time. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
See our latest analysis for dorsaVi
We don't think dorsaVi's revenue of AU$2,385,712 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that dorsaVi comes up with a great new product, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. There was already a significant chance that they would need more money for business development, and indeed they recently put themselves at the mercy of capital markets and raised equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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. Some dorsaVi investors have already had a taste of the bitterness stocks like this can leave in the mouth.
dorsaVi had liabilities exceeding cash when it last reported, according to our data. That put it in the highest risk category, according to our analysis. But with the share price diving 59% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed or they are worried about dilution with the recent cash injection. The image below shows how dorsaVi's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While the broader market lost about 14% in the twelve months, dorsaVi shareholders did even worse, losing 71%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 39% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with dorsaVi (at least 1 which can't be ignored) , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
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