Will the Versarien share price recover in 2021?

The Versarien share price has been volatile over the past 12 months. But can it return to pre-pandemic levels in 2021? Zaven Boyrazian investigates.

| 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.

2020 was a challenging year for the Versarien (LSE:VRS) share price. In the early stages of the pandemic, it collapsed by 70%, reaching its lowest point back in March last year. Since then, the share price has partially recovered. But it still trades well below its pre-pandemic levels.

Is this an opportunity to buy the stock at a discounted price? And should I be adding the business to my portfolio? Let’s take a look.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

An engineering research house

Versarien is an engineering materials business. It owns and operates eight subsidiaries specialising in developing and commercialising new materials. Its combined expertise lies primarily in graphene, plastics, and metals. Its proprietary technologies and developed products have proven to be essential across many sectors, including electronics, aerospace, energy, and industrial engineering.

Covid-19 has caused multiple disruptions across all these sectors as well as Versarien’s own research projects. Consequently, the firm reported its biggest loss since its IPO in 2013, which likely triggered the drop in the share price.

In January this year, Versarien’s share price looked like it was on the road to recovery. Unfortunately, the rise was short-lived. And once again, it began to fall following the publication of another report. Losses have continued to expand while revenues decline.

However, there were some promising trends. Graphene product sales significantly increased thanks to the successful launch of its specialised facemasks. And it also began working on a new engineering project with Rolls-Royce. Could this be a sign that the worse has passed?

Risks to consider

Covid-19 has undoubtedly wreaked havoc on the business. However, from what I can tell, the collapsing share price appears to be due to over-valuation rather than any underlying problems with the company. The increasing losses are bad, but the cause is temporary. And with plenty of cash on the balance sheet, I don’t think it’s in any immediate financial danger. 

Meanwhile, in 2019, the Versarien share price was trading as high as 132.5p. That’s roughly a market capitalisation of £205m despite being unprofitable and only generating £9m in revenue that year. Today’s the company is valued closer to £70m, which still seems expensive but not as ludicrous. At least that’s what I think.

It’s also worth noting that it is currently unclear when Versarien will become profitable. And so the firm is and will remain dependent on outsiders to raise additional capital. So far, this has been achieved through a mixture of debt and equity issues. However, these may not be available in the future, and the latter appears to be creating a dilution effect. After all, the shares outstanding have increased by 60% over the past five years.

The Versarien share price looks risky

Versarien share price: time to buy?

Operating within the engineering industry is tough. The constant technological innovation and vast competition can often lead to companies becoming obsolete or superseded by rivals. However, Versarien’s ability to attract and retain industry veterans partners like Rolls-Royce, as well as expand its offerings into the Chinese markets, is encouraging.

Personally, I think it’s still too soon to invest. Therefore I’m not going to buy any Versarien shares for my portfolio today. But I will be keeping a close eye on how it performs in the future.

Meanwhile I've spotted another growth stock that looks far cheaper and far more promising...

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Zaven Boyrazian does not own shares in Versarien. 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

A Rolls-Royce employee works on an engine
Investing Articles

In penny stock territory, is the Rolls-Royce share price set to soar?

The Rolls-Royce share price has sunk recently, falling into penny stock territory. But with flying hours recovering, is it too…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Lloyds shares drop 20% in 4 months. Should I buy now?

Lloyds shares have lost a fifth of their value since peaking on 17 January this year. But after rebounding from…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As the stock market recovery stalls, should I wait to buy?

Has the stock market recovery run out of steam? If so, what does that mean for our writer's portfolio? Here…

Read more »

Diagonal chain made of zeros and ones. Cryptocurrency and mining.
Investing Articles

At 55p, is the Argo Blockchain (LON:ARB) share price too cheap to miss?

With a low P/E ratio and strong financial results, could the Bitcoin miner be good value for money?

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Here are 2 recession-proof FTSE stocks!

In the face of current economic uncertainty and fears of a looming recession, this Fool identifies two recession-proof FTSE stocks.

Read more »

British Pennies on a Pound Note
Investing Articles

Here is 1 penny stock primed to benefit from the construction boom!

Jabran Khan delves deeper into a penny stock that he believes could benefit from the construction boom, and explains why…

Read more »

Various denominations of notes in a pile
Investing Articles

Here is 1 top passive income stock to buy and hold!

Jabran Khan wants to boost his passive income stream through dividends and has identified this insurance giant as a way…

Read more »

Cheerful young businesspeople with laptop working in office
Investing Articles

These are the 5 worst ways to invest in stocks

It's all too easy to lose money when you don't really know how to invest in stocks. Here are the…

Read more »