Seven reasons why Trufin's (LON:TRU) share price might be in trouble

Technology operator Trufin's (LON:TRU) share price has had a disappointing time of late:

What is driving the share price underperformance here? The group IPOd in 2018 and has only been generating revenue since 2016. What's more, it has posted some pretty substantial losses during its short life as a listed company, especially given its market cap of £188.4m:

One thing in the group's favour is the fact that it has just over £100m of cash on its balance sheet. Nevertheless, the fact that the group has had to raise more than £150m in the two years since its IPO suggests that Trufin has a problem with cash burn.

Given forecasts of more chunky losses in the years ahead, it is vital that Trufin has the finances to fund its operations. Luckily there is a checklist called the Piotroski F-Score specifically designed to identify financial health trends. 

Unfortunately, what the F-Score algorithm says for Trufin is not good. We'll get into this later, but first a bit more on what this number actually means.

Why Trufin (LON:TRU) shareholders need to know the Piotroski F-Score

The Piotroski F-Score is a nine-strong checklist split up into three sections, each looking at a different part of a company's financial situation. Its secret sauce is that, unlike most ratios, the F-Score looks more deeply into the direction in which a company’s financial health is moving.

When a stock gets beaten down it ends up in the bargain basement of the stock market. From here there are generally three outcomes. The stock either:

• Stumbles along, zombie-like,
• Tumbles into administration, or
• Recovers emphatically

Piotroski found that weak stocks with an F-Score of 2 or less are five times more likely to either go bankrupt or delist due to financial problems. Working our way through Piotroski's checklist, we can see that Trufin gets a lowly F-Score of 2 out of a possible 9. Food for thought for anyone looking to hold onto their money.

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