Whenever I’ve covered the [email protected] Capital (LSE: SYME) share price, I’ve always been impressed by the company’s development and potential. The supply chain finance group has established itself in the financing market, offering borrowers a unique product and lenders easy access to potential clients.
The value of the loans originated by the enterprise has grown steadily over the past year. The gross origination of client companies increased 13% between December 2020 and the end of March, to €2.4bn. It now has a total of 187 client companies.
Acquisitions to boost growth
To help increase growth, [email protected] has been acquiring other businesses in the sector. Towards the beginning of the year, it set about acquiring a “complementary inventory in-transit business“. According to management, this will help the group achieve its goal of being a leading global inventory monetisation platform.
At the same time, the group has agreed to a captive funding route with an Italian banking group, which hasn’t yet been named. It has also agreed to acquire 10% of a fintech bank, the name of which also hasn’t been disclosed.
This strategy will enable the company to use bank deposits to fund its lending, subject to regulations. In theory, with access to this additional funding, the firm should be able to accelerate its growth and lending prospects.
All of the above suggests to me the group is firing on all cylinders. As such, while the [email protected] Capital share price has been under pressure recently, I think its fundamentals are improving.
This bodes well for future share price potential. A company’s share price should track its underlying business performance over the long run. Therefore, as [email protected] continues to build up its lending network and relationships in the financial services industry, I think its stock price should reflect its improved outlook.
That said, while the company has made tremendous progress over the past two years, it’s still a small enterprise. At the time of writing, the share price has a market capitalisation of £121m. The stock price of 0.38p also means this business is a penny stock.
[email protected] Capital share price outlook
Due to the size, this company might not be suitable for all investors. Smaller businesses can find it harder to attract talent and financing, which may impede growth. What’s more, the financial services sector is highly regulated. If [email protected] falls foul of regulators, its growth could collapse overnight. These are the primary risks the enterprise faces today.
Despite these risks, I’m encouraged by the company’s growth over the past two years. As such, I’d buy the stock for my portfolio today as a speculative investment. If the group’s underlying growth continues, I reckon the [email protected] Capital share price has a bright future. That’s assuming none of the risks above materialise.
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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.