Yahoo Finance European Metals Holdings (ASX:EMH) adds AU$16m to market cap in the past 7 days, though investors from three years ago are still down 66%
Over the last month the European Metals Holdings Limited (ASX:EMH) has been much stronger than before, rebounding by 55%. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 66% in that time. So it is really good to see an improvement. While many would remain nervous, there could be further gains if the business can put its best foot forward.
On a more encouraging note the company has added AU$16m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
See our latest analysis for European Metals Holdings
We don't think European Metals Holdings' revenue of AU$1,536,632 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that European Metals Holdings will find or develop a valuable new mine before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Some European Metals Holdings investors have already had a taste of the bitterness stocks like this can leave in the mouth.
European Metals Holdings had cash in excess of all liabilities of AU$5.2m when it last reported (December 2023). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 18% per year, over 3 years , it seems likely that the need for cash is weighing on investors' minds. You can click on the image below to see (in greater detail) how European Metals Holdings' cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
While the broader market gained around 8.6% in the last year, European Metals Holdings shareholders lost 29%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 1.7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand European Metals Holdings better, we need to consider many other factors. For instance, we've identified 5 warning signs for European Metals Holdings (1 doesn't sit too well with us) that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
