Biomass Energy Project S.A. (WSE:BEP) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But that doesn't change the reality that over twelve months the stock has done really well. Looking at the full year, the company has easily bested an index fund by gaining 94%.
Biomass Energy Project recorded just zł2,329,110 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Biomass Energy Project 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 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). Biomass Energy Project has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Biomass Energy Project had liabilities exceeding cash by zł8.6m when it last reported in December 2019, according to our data. That makes it extremely high risk, in our view. So the fact that the stock is up 102% in the last year shows that high risks can lead to high rewards, sometimes. It's clear more than a few people believe in the potential. You can click on the image below to see (in greater detail) how Biomass Energy Project'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. Given that situation, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Biomass Energy Project's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Biomass Energy Project's TSR, at 94% is higher than its share price return of 94%. 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
It's nice to see that Biomass Energy Project shareholders have received a total shareholder return of 94% over the last year. Notably the five-year annualised TSR loss of 2.8% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Biomass Energy Project (at least 3 which can't be ignored) , and understanding them should be part of your investment process.
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 PL 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.
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.