While Purifloh Limited (ASX:PO3) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 10% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been spectacular. Indeed, the share price is up a whopping 878% in that time. So it might be that some shareholders are taking profits after good performance. Only time will tell if there is still too much optimism currently reflected in the share price.
Anyone who held for that rewarding ride would probably be keen to talk about it.
Purifloh didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). 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 Purifloh 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 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). Purifloh has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
When it last reported its balance sheet in December 2018, Purifloh could boast a strong position, with cash in excess of all liabilities of AU$7.2m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And with the share price up 58% per year, over 5 years, the market is focussed on that blue sky potential. You can click on the image below to see (in greater detail) how Purifloh's cash levels have changed over time. You can see in the image below, how Purifloh's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. However you can take a look at whether insiders have been buying up 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).
A Different Perspective
We're pleased to report that Purifloh shareholders have received a total shareholder return of 611% over one year. That gain is better than the annual TSR over five years, which is 58%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Purifloh 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 AU 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.