The Helium One Global (LSE:HE1) share price is down 57% over the past year and is currently at 8.65p. However, it has traded above 20p within this period. So what would it take to get the share price back higher?
First, a bit of background: this is a helium exploration and development company. In a similar way to an oil exploration company that’s tapping different sites for black gold, Helium One is aiming to win big with a discovery.
Needing to make progress
The first driver that would help lift the share price is progress in the three major project areas. These are the Rukwa, Balangida and Eyasi projects. The drilling campaign last year delivered what the company referred to as proof of concept. This is positive, but the campaigns this year need to show material progress in order for a potential investor (i.e. me) to be interested.
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Personally, I don’t think it needs to get to a commercialised stage of extraction this year to get the share price higher. Progress alone should be enough to cause a spike higher. This is because speculation with a small-cap stock like Helium One can cause a large movement. With a market cap of £55m, it only takes a relatively small amount of buying to trigger a sharp move higher.
In this case, the highs of the year could be a level that’s reached. However, the speculative push could reach any price. It’s very hard for any investor to put an accurate price on where a move could go.
Fundamental drivers
On the other hand, I can take a look at a fundamental reason for the shares to jump. In the latest results, the company generated no revenue. It lost just under $2m for the second half of 2021. This represented a loss per share of $0.31.
Logically, if the company was able to extract helium at the end of this year and generate revenue in 2023, the picture completely changes. For example, if the earnings flipped from a loss to a small profit of $0.01 per share, this would put the price-to-earnings (P/E) ratio at 10.
In the process of achieving this, the share price should move drastically higher. Even if it traded to 20p, the P/E ratio would be 25. This seems very reasonable for this sector that’s characterised by very high P/E ratios.
However, the big concern I have is that the company might never make a profit. The projects are developing well, but there’s a big leap to generating sustainable revenue and breaking even. I really struggle to see the vision for Helium One right now.
I’m happy to be proven wrong, with upcoming results potentially highlighting fresh positive news. Until then, I’m going to stay clear of investing in the stock as I feel it’s too uncertain.
