Yahoo Finance Introducing Flamingo AI (ASX:FGO), The Stock That Collapsed 97%
As an investor, mistakes are inevitable. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of Flamingo AI Limited (ASX:FGO); the share price is down a whopping 97% in the last three years. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 86% in a year. Shareholders have had an even rougher run lately, with the share price down 60% in the last 90 days.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
View our latest analysis for Flamingo AI
Flamingo AI recorded just AU$764,162 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Flamingo AI 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). Flamingo AI has already given some investors a taste of the bitter losses that high risk investing can cause.
Flamingo AI had cash in excess of all liabilities of just AU$2.4m when it last reported (December 2019). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 69% per year, over 3 years. You can click on the image below to see (in greater detail) how Flamingo AI's cash levels have changed over time.
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? 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
The last twelve months weren't great for Flamingo AI shares, which performed worse than the market, costing holders 86%. Meanwhile, the broader market slid about 9.5%, likely weighing on the stock. Shareholders have lost 69% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. 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. 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. Even so, be aware that Flamingo AI is showing 5 warning signs in our investment analysis , and 3 of those make us uncomfortable...
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 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.
