The Supply@ME Capital share price slumps. Here’s what I’d do now

Rupert Hargreaves explains why he thinks the Supply@ME Capital share price has potential as the company’s lending activity continues to expand

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Supply@ME Capital (LSE: SYME) share price has plunged over the past week. During the past five days, shares in the company have fallen around 20%

Unfortunately, the firm’s performance over the past year is not much better. Over the past 12 months, the stock is off nearly 60%. 

Investors were selling the stock this week after the company published its revenue forecast for the year. 

Supply@ME Capital share price outlook

The company, which provides supply chain finance solutions for businesses across Europe, expects to generate consolidated revenues of between £3.8m and £4.9m for the financial year ending December 2021.

This forecast is based on proposed fees that the group will charge for the year according to accounting standards. The company expects a similar amount to be deferred and recognised in the following financial year. 

What’s more, management has noted that these figures do not include any contribution from ongoing developments in Captive Bank funding. The numbers also exclude contributions from the International Chamber of Commerce partnership and execution of Sharia-compliant inventory monetisation transactions.

The Supply@ME Capital share price has always been a ‘jam tomorrow’ business. The company’s growth has been taking shape slowly over the past few years. These numbers show the enterprise is heading in the right direction. Its growth is starting to pick up as more and more customers turn to the inventory financing specialist. 

The trouble is, it is pretty challenging to value the enterprise based on what we know today. 

Supply@ME is producing revenues, and it is clear the group has a product customers want to use. But, profits have not yet materialised. It could be some time before they do. In the meantime, it will be challenging for me to place a value on the stock. 

Risks and challenges

There are a couple of other risks I need to consider as well. The fintech sector is incredibly competitive, and companies are continually fighting for market share. This could impact the growth of the Supply@ME Capital share price in the long run. 

The firm is also heavily reliant on third-parties to provide funding for its customers. Therefore, its reputation is far more critical than it would be for a traditional financial business. If its reputation is damaged, third-parties may pull their funding, which would have a devastating impact on its ability to grow and service customers’ needs. 

Considering all of the above, while I believe Supply@ME has an exciting product, I would not buy the stock for my portfolio today. I would rather sit on the sidelines and see how the company’s growth pans out over the next year or two. When the enterprise can generate a sustainable profit, I would consider buying, as this would imply the business can stand on its own two feet. 

However, in the meantime, I am not attracted to the lower Supply@ME Capital share price. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »