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We think intelligent long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the Examobile S.A. (WSE:EXA) share price dropped 58% in the last half decade. That's an unpleasant experience for long term holders. Furthermore, it's down 57% in about a quarter. That's not much fun for holders.
We don't think Examobile's revenue of zł972,308 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Examobile can make progress and gain better traction for the business, before it runs low on cash.
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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Some Examobile investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it last reported its balance sheet in March 2019, Examobile had cash in excess of all liabilities of zł1.3m. 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 16% per year, over 5 years. The image below shows how Examobile'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? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
It's nice to see that Examobile shareholders have received a total shareholder return of 10% over the last year. Notably the five-year annualised TSR loss of 16% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. You could get a better understanding of Examobile's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
We will like Examobile better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on PL 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 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.