Yahoo Finance Introducing Lifespot Health (ASX:LSH), The Stock That Tanked 85%
As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of Lifespot Health Ltd (ASX:LSH), who have seen the share price tank a massive 85% over a three year period. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 51% lower in that time. Unfortunately the share price momentum is still quite negative, with prices down 38% in thirty 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 Lifespot Health
With just AU$132,975 worth of revenue in twelve months, we don't think the market considers Lifespot Health to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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. Investors will be hoping that Lifespot Health can make progress and gain better traction for the business, before it runs low on cash.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Lifespot Health has already given some investors a taste of the bitter losses that high risk investing can cause.
Lifespot Health only just had cash in excess of all liabilities when it last reported. So it's prudent that the management team has already moved to replenish reserves through the recent capital raising event. With that in mind, you can imagine there may be other factors that caused the share price to drop 47% per year, over 3 years. You can click on the image below to see (in greater detail) how Lifespot Health'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'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 Lifespot Health shares, which performed worse than the market, costing holders 51%. Meanwhile, the broader market slid about 12%, likely weighing on the stock. The three-year loss of 47% 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. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Lifespot Health is showing 5 warning signs in our investment analysis , and 3 of those shouldn't be ignored...
We will like Lifespot Health better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.
