EVR Holdings plc (LON:EVRH) shareholders should be happy to see the share price up 10% in the last month. But that doesn’t change the fact that the returns over the last year have been disappointing. During that time the share price has sank like a stone, descending 58%. The share price recovery is not so impressive when you consider the fall. It may be that the fall was an overreaction.
With just UK£6,831 worth of revenue in twelve months, we don’t think the market EVR Holdings has proven its business plan. This state of affairs suggests that venture capitalists won’t provide funds on attractive terms. As a result, we think it’s unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that EVR Holdings will significantly advance the business plan before too long.
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. EVR Holdings has already given some investors a taste of the bitter losses that high risk investing can cause.
When it last reported its balance sheet in June 2018, EVR Holdings had net cash of UK£25m. That’s not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. We’d venture that shareholders are concerned about the need for more capital, because the share price has dropped 58% in the last year. The image belows shows how EVR Holdings’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? It would bother me, that’s for sure. You can click here to see if there are insiders selling.
A Different Perspective
While EVR Holdings shareholders are down 58% for the year, the market itself is up 3.3%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 9.7%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.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.