Did You Manage To Avoid DigiCrypts Blockchain Solutions's (CSE:DIGI) Painful 69% Share Price Drop?

It is doubtless a positive to see that the DigiCrypts Blockchain Solutions Inc. (CSE:DIGI) share price has gained some 33% in the last three months. But that doesn't change the fact that the returns over the last year have been disappointing. Like a receding glacier in a warming world, the share price has melted 69% in that period. The share price recovery is not so impressive when you consider the fall. Of course, it could be that the fall was overdone.

View our latest analysis for DigiCrypts Blockchain Solutions

DigiCrypts Blockchain Solutions recorded just CA$35,926 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 shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that DigiCrypts Blockchain Solutions 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 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 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 DigiCrypts Blockchain Solutions investors might realise.

DigiCrypts Blockchain Solutions had liabilities exceeding cash by CA$649k when it last reported in October 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 69% in the last year , it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how DigiCrypts Blockchain Solutions'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

DigiCrypts Blockchain Solutions shareholders are down 69% for the year, even worse than the market loss of 23%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. Putting aside the last twelve months, it's good to see the share price has rebounded by 33%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). 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. Take risks, for example - DigiCrypts Blockchain Solutions has 6 warning signs (and 5 which are potentially serious) we think you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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