intelliHR Limited (ASX:IHR) shareholders will doubtless be very grateful to see the share price up 37% in the last quarter. But that doesn't change the fact that the returns over the last year have been less than pleasing. In fact the stock is down 29% in the last year, well below the market return.
We don't think intelliHR's revenue of AU$527,827 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. 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 intelliHR can make progress and gain better traction for the business, before it runs low on cash.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. 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).
intelliHR had liabilities exceeding cash by AU$1.9m when it last reported in June 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -29% in the last year , it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how intelliHR's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how intelliHR's cash levels have changed over time.
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. What if insiders are ditching the stock hand over fist? 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 intelliHR shareholders are down 29% for the year, the market itself is up 20%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's great to see a nice little 37% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 7 warning signs for intelliHR (of which 3 are a bit unpleasant!) you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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