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It's been a soft week for Premium Fund S.A. (WSE:PMF) shares, which are down 18%. But that cannot eclipse the spectacular share price rise we've seen over the last twelve months. Few could complain about the impressive 317% rise, throughout the period. Arguably, the recent fall is to be expected after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.

See our latest analysis for Premium Fund

Premium Fund recorded just zł197,000 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). Investors will be hoping that Premium Fund 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. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Premium Fund investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

Our data indicates that Premium Fund had zł12,486 more in total liabilities than it had cash, when it last reported in December 2018. That makes it extremely high risk, in our view. So we're surprised to see the stock up 317% in the last year, but we're happy for holders. 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 Premium Fund's cash levels have changed over time.

Of course, the truth is that it is hard to value companies without much revenue or profit. One thing you can do is check if company insiders are buying shares. If they are buying a significant amount of shares, that's certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

It's nice to see that Premium Fund shareholders have received a total shareholder return of 317% over the last year. That's better than the annualised return of 8.7% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before deciding if you like the current share price, check how Premium Fund scores on these 3 valuation metrics.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.