Simris Alg AB (publ) (STO:SIMRIS B) shareholders should be happy to see the share price up 27% in the last month. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 61% in the last three years. So it is really good to see an improvement. After all, could be that the fall was overdone.

Check out our latest analysis for Simris Alg

With just kr1,735,813 worth of revenue in twelve months, we don't think the market considers Simris Alg to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that Simris Alg can make progress and gain better traction for the business, before it runs low on cash.

Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as Simris Alg investors might realise.

Simris Alg had liabilities exceeding cash by kr10,667,000 when it last reported in March 2019, according to our data. That puts it in the highest risk category, according to our analysis. But since the share price has dived -27% per year, over 3 years, it looks like some investors think it's time to abandon ship, so to speak. The image below shows how Simris Alg's balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how Simris Alg's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

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. Would it bother you if insiders were selling the 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.

What about the Total Shareholder Return (TSR)?

We've already covered Simris Alg's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Simris Alg's TSR, at -56% is higher than its share price return of -61%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

The last twelve months weren't great for Simris Alg shares, which cost holders 14%, while the market was up about 8.6%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Unfortunately, the longer term story isn't pretty, with investment losses running at 24% per year over three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course Simris Alg may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE 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.