Douugh Limited (ASX: DOU) is one of the only neobanks listed on a stock exchange.
Douugh is deluding a ‘financial wellness’ app that leverages artificial intelligence and software-as-a-service banking systems to automate finance for its users.
A pre-revenue listing
Douugh went public and listed on the ASX through a reverse takeover listing in October 2020. Douugh took over the failed Australian telco ZipTel (ASX: ZIP) and used its ASX listing as a way to become publicly traded.
The listing raised $6 million for Douugh, allowing them to accelerate its launch to market of a ‘financial wellness’ app.
At the time of writing, Douugh is still pre-revenue and has yet to publish their app to the App Store.
A recent ASX announcement from Douugh said they had launched the app in the U.S. after completing beta testing.
How to value Douugh shares
Rask Media writer Patrick Melville looked into Douugh shares in October and tried to value the business. Patrick pointed out that company is almost impossible to value as it ‘makes no money’.
Douugh raised capital and listed at $0.03 per share, and as Patrick points out this is the price that institutions valued Douugh at. At the time of publishing, Douugh trades at $0.35 per share.
From listing til today, Douugh has still not received any revenue. So what justifies this 10 times increase in share price?
Speculation.
Douugh is a speculative share that is pre-revenue, pre-profit and, until yesterday, was pre-product. Investors are buying into the possibility that Douugh will generate money in the future to justify its share price today. Investors are hoping that by getting in early that they will capture future growth.
Would I be buying Douugh shares today?
One of the Rask Investment Philosophies is to invest in companies with ‘strong competitive advantages or moats’ and shares that are ‘reasonably valued’.
When I look at Douugh through this lens, it fails on both philosophies. Douugh does not have a strong competitive advantage or any advantage over the competition in finance apps, neobanks, or traditional banks. This is because there is currently no Douugh product, with no users, and no revenue. In otherwise, no moat.
Douugh is also pre-revenue, so using just about any valuation tool the share price for Douugh should be essentially zero. The value of the company is essentially its book value, which as reported on its balance sheet is around $6.5 million.
With Douugh currently trading with a market cap of $106 million. I would say Douugh is not reasonably valued and instead heavily over valued.
I would not be looking to buy Douugh shares today, maybe after they start to generate revenue I will take another look at the shares. You’ll find more ASX growth shares on Rask Media.
