Many who have been following the stock market closely since May would know about Artivision. They released a news on 15th May saying the company has made a Facebook application called Advision which is a revenue-sharing application that displays advertisement on videos and still photographs uploaded by users of Facebook. The share price has been volatile for some time and rose by a whooping 69.2% to close at 22 cents yesterday!
However, if we were to look at the fundamentals of the company, it’s nowhere near a company that value investors will invest in. Take a close look at the following:
From the above, it can be seen that Artivision had net losses, dwindling shareholders’ equity, negative cashflow, dwindling cash balances, negative margins, negative ROE and ROA for the past three years. The share price has been going up like crazy based on pure speculation and not due to the fundamentals of the company.
We should all remember that behind every stock price, there’s an underlying business. If the underlying business is not sound, one should stay away from the business. Buying such businesses will only cause an emotional roller-coaster (based on fear and greed). Unless you have lots of money to spare and can stomach huge risks, you should stick to investing in fundamentally strong companies with good free cash flow. Such prudent investing will ensure that you can have a good night’s sleep and can also pave way for a worry-free retirement.