The [email protected] Capital share price slumps. Here’s what I’d do now

Rupert Hargreaves explains why he thinks the [email protected] Capital share price has potential as the company’s lending activity continues to expand

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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.

The [email protected] 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. 

[email protected] 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 [email protected] 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. 

[email protected] 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 [email protected] 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 [email protected] 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 [email protected] 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 considered so you should 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.

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