Euro Multivision Limited (NSE:EUROMULTI) shareholders will doubtless be very grateful to see the share price up 57% in the last month. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Like a ship taking on water, the share price has sunk 84% in that time. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
With just ₹5,680,000 worth of revenue in twelve months, we don't think the market considers Euro Multivision to have proven its business plan. You have to wonder why venture capitalists aren't funding it. 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 Euro Multivision will significantly advance the business plan before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as Euro Multivision investors might realise.
Our data indicates that Euro Multivision had ₹4,095,321,436 more in total liabilities than it had cash, when it last reported in June 2019. That makes it extremely high risk, in our view. But since the share price has dived -30% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Euro Multivision's cash levels have changed over time (click to see the values). The image below shows how Euro Multivision'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
While the broader market lost about 9.5% in the twelve months, Euro Multivision shareholders did even worse, losing 76%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 30% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
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