Is XTPL's (WSE:XTP) Share Price Gain Of 117% Well Earned?

XTPL S.A. (WSE:XTP) shareholders might be concerned after seeing the share price drop 30% in the last quarter. On the other hand, over the last twelve months the stock has delivered rather impressive returns. Like an eagle, the share price soared 117% in that time. So it may be that the share price is simply cooling off after a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.

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View our latest analysis for XTPL

We don't think XTPL's revenue of zł2,153,338 is enough to establish significant demand. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that XTPL 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. XTPL has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

XTPL had cash in excess of all liabilities of just zł3.0m when it last reported (September 2018). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. It's a testament to the popularity of the business plan that the share price gained 117% in the last year, despite the weak balance sheet. You can click on the image below to see (in greater detail) how XTPL's cash levels have changed over time.

WSE:XTP Historical Debt, May 26th 2019
WSE:XTP Historical Debt, May 26th 2019

Of course, the truth is that it is hard to value companies without much revenue or profit. However you can take a look at whether insiders have been buying up 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.

A Different Perspective

XTPL shareholders should be happy with the total gain of 117% over the last twelve months. Unfortunately the share price is down 30% over the last quarter. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

We will like XTPL better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.