The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in 450 Plc (LON:450), since the last five years saw the share price fall 96%. While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.
See our latest analysis for 450
450 hasn’t yet reported any revenue, so it’s as much a business idea as an actual business. You have to wonder why venture capitalists aren’t funding it. 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 450 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. 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 450 investors might realise.
450 has plenty of cash in the bank, with cash in excess of all liabilities sitting at UK£3.6m, when it last reported (June 2024). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 14% per year, over 5 years , it seems like the market might have been over-excited previously. You can see in the image below, how 450’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. What if insiders are ditching the stock hand over fist? 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.
We’d be remiss not to mention the difference between 450’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. 450 hasn’t been paying dividends, but its TSR of -19% exceeds its share price return of -96%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
