Those Who Purchased Effnetplattformen (STO:EFFP) Shares Three Years Ago Have A 59% Loss To Show For It
While it may not be enough for some shareholders, we think it is good to see the Effnetplattformen AB (publ) (STO:EFFP) share price up 15% in a single quarter. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 59% in the last three years. Some might say the recent bounce is to be expected after such a bad drop. Perhaps the company has turned over a new leaf.
See our latest analysis for Effnetplattformen
Effnetplattformen recorded just kr9,569,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. You have to wonder why venture capitalists aren't funding it. 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 Effnetplattformen will significantly advance the business plan before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as Effnetplattformen investors might realise.
Effnetplattformen has plenty of cash in the bank, with cash in excess of all liabilities sitting at kr20m, when it last reported (December 2019). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 26% per year, over 3 years , it seems like the market might have been over-excited previously. You can see in the image below, how Effnetplattformen's cash levels have changed over time (click to see the values).
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, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Effnetplattformen's total shareholder return (TSR) and its share price change, which we've covered above. 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. Effnetplattformen hasn't been paying dividends, but its TSR of -57% exceeds its share price return of -59%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's nice to see that Effnetplattformen shareholders have gained 16% (in total) over the last year. What is absolutely clear is that is far preferable to the dismal 25% average annual loss suffered over the last three years. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. 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 4 warning signs with Effnetplattformen (at least 3 which don't sit too well with us) , and understanding them should be part of your investment process.
But note: Effnetplattformen may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE 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.
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