While it may not be enough for some shareholders, we think it is good to see the SciBase Holding AB (publ) (STO:SCIB) share price up 13% in a single quarter. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 85% in that time. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
SciBase Holding recorded just kr6,899,000 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? As a result, we think it’s unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. Investors will be hoping that SciBase Holding can make progress and gain better traction for the business, before it runs low on cash.
As a general rule, if a company doesn’t have much revenue, and it loses money, then it is a high risk investment. 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). SciBase Holding has already given some investors a taste of the bitter losses that high risk investing can cause.
When it last reported its balance sheet in December 2018, SciBase Holding had net cash of kr58m. While that’s nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price down 47% per year, over 3 years, it seems likely that the need for cash is weighing on investors’ minds. You can click on the image below to see (in greater detail) how SciBase Holding’s cash and debt levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. 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. You can click here to see if there are insiders selling.
A Different Perspective
Over the last year, SciBase Holding shareholders took a loss of 59%. In contrast the market gained about 9.4%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 47% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to ‘buy when there is blood on the streets’, he also focusses on high quality stocks with solid prospects. If you would like to research SciBase Holding in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE exchanges.
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