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If You Had Bought Kekrops (ATH:KEKR) Shares Five Years Ago You'd Have Made 96%

Simply Wall St

Some Kekrops S.A. (ATH:KEKR) shareholders are probably rather concerned to see the share price fall 40% over the last three months. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 96% in that time.

See our latest analysis for Kekrops

We don't think Kekrops's revenue of €11,950 is enough to establish significant demand. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Kekrops 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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Some Kekrops investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

Kekrops had liabilities exceeding cash by €4.0m when it last reported in June 2019, according to our data. That makes it extremely high risk, in our view. So we're surprised to see the stock up 101% per year, over 5 years , but we're happy for holders. Investors must really like its potential. You can click on the image below to see (in greater detail) how Kekrops's cash levels have changed over time.

ATSE:KEKR Historical Debt March 29th 2020

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. It's usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Kekrops's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Kekrops hasn't been paying dividends, but its TSR of 168% exceeds its share price return of 96%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

While the broader market lost about 17% in the twelve months, Kekrops shareholders did even worse, losing 31%. 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. On the bright side, long term shareholders have made money, with a gain of 22% per year over half a decade. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 7 warning signs for Kekrops (of which 2 don't sit too well with us!) you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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.

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. Thank you for reading.