Regional News

“Cash burn” could be worry for UK’s Purplebricks, claims investment website

By Victoria Haviland 0 Comments NEWS, Regional News

Financial services company providing investor advice, The Motley Fool, has published an article about its doubt with Purplebricks' long-term profitability.

Ian Pierce, an investment writer, likes Purplebricks' businessmodel but isn't sure about the company itself.

“My reticence is mainly drawn from the company’s valuation (which at £1.1 billion against £46.8m in sales for the half year to October appears very stretched) and its rapid expansion,” Pierce writes.

He admits that the company isn't in danger of a "cash burn" but he says with losses in the first half of the year running in the millions and a costly expansion into the US and Australian markets, it might be a worry sooner rather than later.

Pierce wrote that though Purplebricks is a "proven winnter" in the UK by taking market share from rival agencies, its success in two overseas market is less likely and "if things become rocky in either of them," Purplebricks' monetary value and success might take a nose dive.

He concludes, “with little to stop larger rivals from copying its business model if they become desperate enough, a very rich valuation and losses mounting, I’d have a hard time justifying purchasing shares of Purplebricks right now.”

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