Those Who Purchased PBS Finanse (WSE:PBF) Shares Five Years Ago Have A 94% Loss To Show For It

It’s nice to see the PBS Finanse S.A. (WSE:PBF) share price up 20% in a week. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Indeed, the share price is down a whopping 94% in that time. While the recent increase might be a green shoot, we’re certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.

Check out our latest analysis for PBS Finanse

We don’t think PBS Finanse’s revenue of zł2,934,000 is enough to establish significant demand. We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? 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 PBS Finanse will significantly advance the business plan before too long.

Companies that lack both meaningful revenue and profits are usually considered 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 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). It certainly is a dangerous place to invest, as PBS Finanse investors might realise.

When it reported in June 2019 PBS Finanse had minimal cash in excess of all liabilities consider its expenditure: just zł119k to be specific. So if it hasn’t remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 44% per year, over 5 years . The image below shows how PBS Finanse’s balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how PBS Finanse’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.

WSE:PBF Historical Debt, November 8th 2019
WSE:PBF Historical Debt, November 8th 2019

In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I’d like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.

A Different Perspective

While the broader market gained around 2.0% in the last year, PBS Finanse shareholders lost 27%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn’t as bad as the 44% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You could get a better understanding of PBS Finanse’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on PL exchanges.

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.

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. Thank you for reading.