Can You Imagine How Elated Nordtelekom Távközlési Szolgáltató Nyrt's (BUSE:NORDTELEKOM) Shareholders Feel About Its 403% Share Price Gain?

By
Simply Wall St
Published
March 12, 2020
BUSE:NORDTELEKOM

Nordtelekom Távközlési Szolgáltató Nyrt. (BUSE:NORDTELEKOM) shareholders might be rather concerned because the share price has dropped 35% in the last month. But over three years the performance has been really wonderful. The longer term view reveals that the share price is up 403% in that period. So the recent fall doesn't do much to dampen our respect for the business. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

See our latest analysis for Nordtelekom Távközlési Szolgáltató Nyrt

With just Ft37,576,000 worth of revenue in twelve months, we don't think the market considers Nordtelekom Távközlési Szolgáltató Nyrt to have proven its business plan. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Nordtelekom Távközlési Szolgáltató Nyrt will significantly advance the business plan before too long.

We think companies that have neither significant revenues nor profits are pretty high risk. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Of course, if you time it right, high risk investments like this can really pay off, as Nordtelekom Távközlési Szolgáltató Nyrt investors might know.

Our data indicates that Nordtelekom Távközlési Szolgáltató Nyrt had Ft166m more in total liabilities than it had cash, when it last reported in June 2019. That makes it extremely high risk, in our view. So the fact that the stock is up 49% per year, over 3 years shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. You can see in the image below, how Nordtelekom Távközlési Szolgáltató Nyrt's cash levels have changed over time (click to see the values). The image below shows how Nordtelekom Távközlési Szolgáltató Nyrt's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

BUSE:NORDTELEKOM Historical Debt, March 12th 2020
BUSE:NORDTELEKOM Historical Debt, March 12th 2020

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. You can click here to see if there are insiders buying.

A Different Perspective

We regret to report that Nordtelekom Távközlési Szolgáltató Nyrt shareholders are down 14% for the year. Unfortunately, that's worse than the broader market decline of 11%. 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. Longer term investors wouldn't be so upset, since they would have made 32%, each year, over five years. 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. To that end, you should learn about the 7 warning signs we've spotted with Nordtelekom Távközlési Szolgáltató Nyrt (including 4 which is don't sit too well with us) .

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 HU 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.

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