Mirriad Advertising plc (LON:MIRI) shareholders should be happy to see the share price up 28% in the last quarter. But in truth the last year hasn't been good for the share price. In fact, the price has declined 13% in a year, falling short of the returns you could get by investing in an index fund.
We don't think Mirriad Advertising's revenue of UK£724,762 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. 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 Mirriad Advertising can make progress and gain better traction for the business, before it runs low on cash.
Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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).
Mirriad Advertising had cash in excess of all liabilities of just UK£6.2m when it last reported (June 2019). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 13% in the last year . You can click on the image below to see (in greater detail) how Mirriad Advertising's cash levels have changed over time. The image below shows how Mirriad Advertising's balance sheet has 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. 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. You can click here to see if there are insiders selling.
A Different Perspective
While Mirriad Advertising shareholders are down 13% for the year, the market itself is up 9.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 28% 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. You could get a better understanding of Mirriad Advertising's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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