Whenever I have covered [email protected] Capital (LSE: SYME) in the past, I have consistently concluded that the share price looks cheap compared to its trading history.
However, over the past six months, the stock has continued to decline in value as the market gives the business the cold shoulder.
Following these declines, I am starting to wonder if the stock is too cheap to pass up. Considering its market opportunity, I continue to believe the company has enormous potential.
SYME share price outlook
Over the past year, the company has made tremendous progress on a number of fronts. The alternative finance specialist is working to progress agreements with parties worldwide.
According to its latest trading update, the group is working on completing the signing of a binding agreement with its first funder for the previously flagged inaugural Italian inventory monetisation transaction.
At the same time, its inventory monetisation platform Trade Flow, which the group acquired in July, is on track to perform better than expected.
Following a year of consolidation and marketing, [email protected] Capital’s management seems to be optimistic about the year ahead. And I am as well.
The global trade financing market is worth hundreds of billions of dollars each year. And it is only growing.
The company is not the only corporation pursuing this business. Hence, competition is a risk, but it is working to produce a unique product and structure that could give it an edge over competitors.
So what does this all mean for the SYME share price? Well, in theory, as the company’s fundamentals improve, the stock should track this improving performance.
Rising losses
Unfortunately, it could be some time before investors see any concrete results from the business. According to City analysts, the enterprise is expected to lose money for the next two years, at least. It seems likely that this uncertainty will continue to put the market off from investing in the company.
I am also wary about investing in the business. While I have expressed optimism about its prospects in the past, it is taking longer than expected for the group to start earning returns for investors.
The longer it takes for the corporation to move into the black, the more money it will consume. In the past, the company has leaned heavily on shareholders to provide the funding to keep the lights on.
The number of shares in issue has increased from 9m to 27bn over the past six years as management has continually issued stock to raise money from investors.
As such, I am not willing to invest in the company today. I think the SYME share price has potential. Still, until the group starts earning its keep, I believe the business will continue to struggle.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
