In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term FRISQ Holding AB (publ) (STO:FRISQ) shareholders, since the share price is down 50% in the last three years, falling well short of the market return of around 3.4%. The more recent news is of little comfort, with the share price down 46% in a year. Furthermore, it's down 34% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 21% in the same timeframe.
We don't think FRISQ Holding's revenue of kr6,962,000 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 FRISQ Holding 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. We can see that they needed to raise more capital, and took that step recently despite the fact that it would have been dilutive 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 FRISQ Holding investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it last reported, FRISQ Holding had minimal cash in excess of all liabilities. So it is a good thing that the company has looked to remedy the situation by raising more capital recently. With that in mind, you can imagine there may be other factors that caused the share price to drop 21% per year, over 3 years. You can see in the image below, how FRISQ Holding's cash levels have changed over time (click to see the values).
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? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between FRISQ Holding's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that FRISQ Holding's TSR, at -47% is higher than its share price return of -50%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
The last twelve months weren't great for FRISQ Holding shares, which performed worse than the market, costing holders 43%. The market shed around 3.7%, no doubt weighing on the stock price. The three-year loss of 19% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand FRISQ Holding better, we need to consider many other factors. Even so, be aware that FRISQ Holding is showing 7 warning signs in our investment analysis , and 3 of those make us uncomfortable...
There are plenty of other companies that have insiders buying up shares. You probably do 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 SE exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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