In my job I see a lot of offers to buy shares in companies. Some of them great, some OK, and some that you just open up the paperwork and then run a mile!
Today I received one of the ‘run a mile’ ones.
A fairly new business (who will remain nameless) is looking for more equity to continue their growth. The prospectus shows that last financial year they had revenue from trading activities of $137,000. Well done to them – it was 13% above the previous year’s revenue. Only problem was that it’s expenses were ~$2,078,000…… (15 times it’s revenue….).
So what’s this business worth? According to the prospectus the business is apparently worth $18.5 million! For those of you interested in financial ratios, that’s ~135 times revenue.
I honestly hope they succeed as a business, but it’s certainly not one that I’m interested in investing it.
Keep it simple, keep it safe, & be careful what you buy!!