Introducing Aqua Bio Technology (OB:ABT), The Stock That Tanked 87%

Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held Aqua Bio Technology ASA (OB:ABT) for five whole years - as the share price tanked 87%. And some of the more recent buyers are probably worried, too, with the stock falling 57% in the last year.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

See our latest analysis for Aqua Bio Technology

Aqua Bio Technology recorded just øre1,619,384 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 that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Aqua Bio Technology can make progress and gain better traction for the business, before it runs low on cash.

We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Aqua Bio Technology has already given some investors a taste of the bitter losses that high risk investing can cause.

When it reported in June 2018 Aqua Bio Technology had minimal net cash consider its expenditure: just øre3.1m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 33% per year, over 5 years. You can click on the image below to see (in greater detail) how Aqua Bio Technology's cash and debt levels have changed over time.

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.

A Dividend Lost

The share price return figures discussed above don't include the value of dividends paid previously, but the total shareholder return (TSR) does. By accounting for the value of dividends paid, the TSR can be seen as a more complete measure of the value a company brings to its shareholders. Aqua Bio Technology's TSR over the last 5 years is -81%; better than its share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.

A Different Perspective

Investors in Aqua Bio Technology had a tough year, with a total loss of 57%, against a market gain of about 6.5%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 28% per year over five years. 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.

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.

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. Thank you for reading.