The easiest way to profit from a bull market is to buy an index fund. When you buy individual stocks, you may realize higher profits, but you also run the risk of underperformance. Unfortunately the LCP Holdings and Investments Public Ltd (CSE: LI) the share price fell 27% year over year. That’s well below the market return of 25%. On the positive side, the stock is actually at the top 6.1% over the past three years. In addition, it has fallen by 20% in about a quarter. It’s not a lot of fun for the holders.
With the stock losing 17% in the past week, it’s worth looking at how the company is performing and seeing if there are any red flags.
See our latest analysis for LCP Holdings and investments
With only € 43,066 turnover in twelve months, we do not believe that the market considers LCP Holdings and its investments to have proven its business plan. You have to wonder why venture capitalists don’t fund it. As a result, we believe shareholders are unlikely to pay much attention to current earnings, but instead speculate on growth in the years to come. It seems likely that some shareholders believe that LCP Holdings and Investments will significantly advance the business plan for too long.
Businesses that lack both significant revenue and profit are generally considered high risk. You should know that there is always a chance that this type of business will need to issue more shares to raise funds in order to continue with their business plan. While some of these companies are doing very well in the long run, others are put forward by developers before they fall back to earth and go bankrupt (or be recapitalized).
When its balance sheet was last published in June 2021, LCP Holdings and Investments could claim a solid position, with cash exceeding all liabilities by 4.1 million euros. This allows management to focus on growing the business and not worry too much about raising capital. But with the stock price plunging 27% in the past year, it could be that the price was too high before. You can click on the image below to see (in more detail) how LCP Holdings and investment liquidity levels have changed over time.
In reality, it is difficult to have much certainty when valuing a business that has no income and no profits. Given this situation, would you be concerned if it turned out that insiders were relentlessly selling stocks? I would feel more nervous about the business if that was the case. It costs nothing more than a moment of your time to see if we are picking up insider sales.
What about dividends?
In addition to measuring stock price performance, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any discounted demerger or capital increase, as well as any dividend, on the basis of the assumption that dividends are reinvested. It’s fair to say that the TSR gives a more complete picture of dividend paying stocks. We note that for LCP Holdings and Investments, the TSR over the past year was 19%, which is better than the share price return mentioned above. And there’s no price guessing that dividend payments largely explain the discrepancy!
A different perspective
LCP Holdings and investment shareholders are up 19% year on year (including dividends). Unfortunately, this does not hit the market return. On the bright side, it’s still a payoff, and it’s actually better than the 11% average return over half a decade. This suggests that the business could improve over time. It is always interesting to follow the evolution of stock prices over the long term. But to better understand LCP Holdings and investments, there are many other factors that we need to consider. Like risks, for example. Every business has them, and we’ve spotted 4 warning signs for LCP Holdings and investments (3 of which are a bit disturbing!) that you should know about.
Sure LCP Holdings and Investments May Not Be the Best Stocks to Buy. So you might want to see this free collection of growth stocks.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on the CY exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.