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Does Cliffside Capital's (CVE:CEP) Share Price Gain of 18% Match Its Business Performance?

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Cliffside Capital Ltd. (CVE:CEP) shareholders might be concerned after seeing the share price drop 18% in the last month. But that doesn't change the fact that the returns over the last five years have been respectable. It's good to see the share price is up 18% in that time, better than its market return of 17%.

Check out our latest analysis for Cliffside Capital

Cliffside Capital hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Cliffside Capital will significantly advance the business plan before too long.

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As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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.

Our data indicates that Cliffside Capital had CA$116,240,715 more in total liabilities than it had cash, when it last reported in March 2019. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 3.3% per year, over 5 years, but we're happy for holders. It's clear more than a few people believe in the potential. The image below shows how Cliffside Capital's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

TSXV:CEP Historical Debt, June 12th 2019
TSXV:CEP Historical Debt, June 12th 2019

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying shares. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.

A Different Perspective

Investors in Cliffside Capital had a tough year, with a total loss of 18%, against a market gain of about 0.5%. 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. Longer term investors wouldn't be so upset, since they would have made 3.3%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

Cliffside Capital is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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