At under 5p, are Woodbois shares a no-brainer buy now?

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The Woodbois (LSE: WBI) share price went through something of a boom and bust earlier in 2022. But now that Woodbois shares are back below 5p, are we looking at an attractive penny share price valuation?

At 4.2p, at the time of writing, Woodbois shares are down 18% over the past 12 months. But they’ve been picking up over the past couple of weeks, after the forestry company posted upbeat first-half results.

A few months ago, Woodbois’ fledgling carbon credits business was attracting attention. On top of that, there was a paid article doing the rounds touting 1,000% potential gains for the Woodbois share price.

There’s a key lesson there. When tipsters make claims like that without providing any analysis to back them up, we should give them the time they deserve. And that’s not a single second.

H1 results

Actual fundamental performance is what counts. And the latest interim results from Woodbois show some positive signs. Revenue in the half rose 38% compared to the same period in 2021, reaching $11.3m.

Woodbois reported its “first ever operating profit in H1 2022“. It was only $15,000. But that’s better that the $654,000 loss posted for H1 2021. But, after hefty finance costs, the results still showed a $489,000 loss before tax.

Twist

There’s one further twist to the accounts that makes me a bit twitchy. Further down, under “Items that may be reclassified subsequently to profit or loss”, the company recorded a negative $2m “currency translation differences” item. That leads to a total comprehensive loss of $2.6m for the period.

As of 30 June, Woodbois was sitting on $12.4m of total borrowings. That’s a substantial increase from the $8.3m at 31 December 2021.

For me, financing is still the key factor in evaluating the investment potential of Woodois. I won’t invest in any promising growth prospect unless I can see a financial path to profitability.

Buy?

So will I buy Woodbois shares? Right now, no. Every time I examine one of the company’s results announcements, I find big one-off items that are out of the ordinary. The final results for last year, for example, carried big gains on accounting changes and asset revaluations.

Now things like that often happen when a company is in its early growth stages. But it makes it harder to compare one set of results with the previous. And I still get no real feel for what any underlying level of reliable income might look like.

I do think there may be potential for a business like this. And there’s the carbon credits division too, but that’s still awaiting approvals before it can really get started.

Unclear

Right now, I can’t see any consistent accounting results that I can meaningfully evaluate. And when that happens, I won’t invest in any company.

Woodbois does also point out that “immediate growth projections must of course carry a health warning, particularly given Covid’s lingering disruptive effects on international trade, rising interest rates and the inflationary effects of the war in Ukraine on the global macro-economic environment”.

They can’t say fairer than that, really.

The post At under 5p, are Woodbois shares a no-brainer buy now? appeared first on The Motley Fool UK.

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Alan Oscroft 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.