Over the course of 2022, the Woodbois (LSE: WBI) share price has climbed to 9.4p and fallen back again. It’s dropped as low as 2.6p, and come back up. Where might it go next?
The Woodbois stock gyration makes it look like it’s a new growth stock in its early phase, with profits hopefully just around the corner. But that’s not exactly the truth.
Woodbois in its current guise came into existence in 2019. But that was the result of a restructuring, a new fund raise, and a renaming from its previous identity as Obtala Limited.
In that past life, the shares have been through ups and downs that were a lot bigger than the latest. As Obtala, the price reached 22.5p in 2017 before falling back to earth.
And a few years before that, in 2011, the shares peaked at nearly 54p. That was 18 times today’s 3p Woodbois share price.
Groundhog day?
And looking at the company’s last set of half-year results before its rebirth, I see something scarily familiar. The company was reporting an increase in revenue, but an operating loss of $4.8m. At the time, Obtala told us that “year on year revenues are on track to deliver further growth in 2018“.
When that year’s final results were released by the renamed Woodbois in May 2019, we saw a loss of $5.6m. That was in what the board described as a “transformative year”.
Now the share price is back down in the dumps, where might it go next and what might drive it? In the short term, I think a lot will depend on what the company says next.
Cash burn
Woodbois reported positive operating profit in the first half. But that didn’t bring it close to positive cash flow. In fact, the period saw a cash outflow of $2.8m from operations and investments in assets. And there was just $2.1m cash left on the books.
If the next update shows any significant moves towards sustainable and growing profit, or gives us any hint of when we might see net cash inflow, I think the Woodbois share price could start climbing again.
But if it looks like the company will be seeking extra financing before that happens, I suspect investors could turn away. And the shares could dip again.
Verdict
So would I invest in Woodbois shares today? I do see promise in the company’s business proposition. I like the idea of sustainable hardwood production. And I can see growing worldwide demand for it in the coming decades, as we move away from plastics.
I can also picture a profitable future for the firm’s nascent carbon credits business. That would be, essentially, money simply for owning forestry rights. But it’s some years away yet.
The trouble is, I’m not sure how many years of transformations I’d be prepared to sit through while waiting for a growth stock like this to start generating sustainable profits. So I’ll sit it out, and wait until I see the colour of the cash.
