Yahoo Finance The Dragontail Systems (ASX:DTS) Share Price Is Down 50% So Some Shareholders Are Getting Worried
Dragontail Systems Limited (ASX:DTS) shareholders should be happy to see the share price up 22% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 50% in the last three years, significantly under-performing the market.
Check out our latest analysis for Dragontail Systems
We don't think Dragontail Systems's revenue of US$769,247 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. 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 Dragontail Systems 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. We can see that they needed to raise more capital, and took that step recently despite the fact that it would have been dilutive to current holders. 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).
Our data indicates that Dragontail Systems had more in total liabilities than it had cash, when it last reported. That made it extremely high risk, in our view. But since the share price has dived -21% per year, over 3 years , it looks like some investors think it's time to abandon ship, so to speak, even though the cash reserves look a little better with the capital raising. You can click on the image below to see (in greater detail) how Dragontail Systems'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling 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
Dragontail Systems shareholders are down 47% for the year, falling short of the market return. Meanwhile, the broader market slid about 14%, likely weighing on the stock. The three-year loss of 21% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand Dragontail Systems better, we need to consider many other factors. Take risks, for example - Dragontail Systems has 7 warning signs (and 3 which make us uncomfortable) we think you should know about.
But note: Dragontail Systems 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 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.
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.
