Even the best stock pickers will make plenty of bad investments. Unfortunately, shareholders of Frill Holding AB (publ) (STO:FRILL B) have suffered share price declines over the last year. To wit the share price is down 59% in that time. Because Frill Holding hasn't been listed for many years, the market is still learning about how the business performs. The falls have accelerated recently, with the share price down 58% in the last three months.
With just kr2,305,000 worth of revenue in twelve months, we don't think the market considers Frill Holding to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Frill Holding can make progress and gain better traction for the business, before it runs low on cash.
We think companies that have neither significant revenues nor profits are pretty 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 to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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. Some Frill Holding investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Frill Holding had liabilities exceeding cash by kr630k when it last reported in December 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -59% in the last year , it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Frill Holding's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. You can click here to see if there are insiders selling.
A Different Perspective
Frill Holding shareholders are down 59% for the year, even worse than the market loss of 3.7%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 58%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Like risks, for instance. Every company has them, and we've spotted 6 warning signs for Frill Holding (of which 4 are significant!) you should know about.
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 SE 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.