Can the Woodbois share price grow?

The Woodbois share price soared then slumped. Now it rises again, but can it continue on the back of rising revenues and carbon offsets?

| 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.

Happy young female stock-picker in a cafe

Image source: Getty Images

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 Woodbois (LSE: WBI) share price has risen from its September 2022 low of 3.3p to about 4.3p at the time of writing. That is a 30% gain in less than a month. But let’s introduce some context: Woodbois shares traded for 8p in May 2022, close to 21p in 2017, and near 50p in 2011.

Created with Highcharts 11.4.3Woodbois PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

What does Woodbois do?

Woodbois owns 470,000 hectares of forest concessions across Gabon and Mozambique. It harvests and processes trees into lumber at sawmills in those countries. There is also a veneer factory in Gabon, where high-quality tree trunks are processed into higher-value products. Woodbois also has a wood products trading operation.

Revenues from these operations increased from $7.89m in 2017 to $19.5m in 2019. There was a blip during 2020 and 2021 — hardly surprising given the Covid-19 pandemic — but trailing 12-month revenues are up to $20.6m. Estimates for 2022 and 2023 are $27.1m and $38.5m, respectively.

Should you invest £1,000 in The City Of London Investment Trust Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if The City Of London Investment Trust Plc made the list?

See the 6 stocks

If the estimate for 2023 revenues comes in, sales would have grown by 23% per year on average over the five years up to that point. Woodbois has a P/E ratio of 3.9. That’s cheap for a company growing so quickly.

Does Woodbois sell carbon credits?

Unfortunately, I cannot trust that P/E ratio. It is based on a reported 2021 profit of $91m, which followed a string of losses. But strip out a gain on a bargain purchase of $88m, which is not likely to recur, and the profit falls back to $2.5m, and I get a P/E ratio of more like 44. Moreover, Woodbois has recorded a gain in its biological assets (the trees) on its income statement for multiple years, but that does not represent cash coming into the business.

Looking at the cash flow statement, I see that the company has not generated cash from its operations since 2016, although they are getting less negative.

A carbon solutions business opened this year. Although it has no revenue yet, its potential comes from the estimated 1,700kg of CO2 that one ton of wood sequesters from the atmosphere. The company does not sell carbon credits. But, because its operations could be recognised as carbon negative, it could generate money from selling carbon offsets in the voluntary market. Woodbois also has experience managing forests and could leverage this expertise in reforestation projects.

Woodbois share price

Overall, I see a company with increasing revenues and solid gross margins, that has recently seen its operating margin, excluding those biological asset fair value gains, turn positive. Cash flows from operations could follow suit. I expect the carbon solutions business to help with this, as it should be a low-capital, high-margin business, piggybacking off existing operations. But, it has generated operating costs of $1.3m in its first year, while its first project is still awaiting certification and approval.

I think there is potential for the Woodbois share price to grow. However, it’s still too early for me to rush in. I want more information on the carbon solutions business, for one thing. Woodbois faces significant regulatory risks as the volume of trees it can cut down is regulated within a wide range. That makes, for example, expanding sawmill capacity, which it has done, tricky. This is still a highly speculative AIM stock, but it’s one for me to watch.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

James McCombie 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Could the Tesla share price really fall to $120?

The Tesla share price has collapsed since Trump took office, and the news just keeps getting worse for Elon Musk’s…

Read more »

Investing Articles

2 UK stocks and funds to consider buying during this market downturn!

A diversified portfolio of UK stocks and other assets can deliver excellent long-term returns even after periods of severe volatility.

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

£10,000 invested in Alphabet stock 1 month ago is now worth…

Alphabet stock is a major casualty of Trump’s trade policy, with investors betting on reduced demand for advertising, among other…

Read more »

Investing Articles

Want a comfortable retirement? Here’s how much you need in your SIPP

The SIPP is a great vehicle for confident investors to build their personal pension over time and eventually use that…

Read more »

Investing For Beginners

3 ways I try to spot cheap shares during a stock market crash

Jon Smith talks through his process of filtering for cheap shares at a time when simply buying anything isn't the…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

As share trading hits new records, here’s why I’m planning to keep buying UK shares!

Thinking like Warren Buffett and buying 'on the dip' can unlock significant long-term returns from UK shares. Here's why.

Read more »

Elevated view over city of London skyline
Investing Articles

UK stocks: a brilliant buying opportunity?

UK stocks have taken a battering in recent days. That can be disconcerting -- but our writer is taking a…

Read more »

Bronze bull and bear figurines
Dividend Shares

2 dividend shares that could provide some shelter from the market storm

Jon Smith points out a couple of dividend shares that have yields in excess of 5% -- and that have…

Read more »