The last three months have been tough on Bio-Path Holdings, Inc. (NASDAQ:BPTH) shareholders, who have seen the share price decline a rather worrying 35%. Despite this, the stock is a strong performer over the last year, no doubt about that. During that period, the share price soared a full 184%. So it is important to view the recent reduction in price through that lense. The real question is whether the business is trending in the right direction.
Bio-Path Holdings recorded just US$37,000 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. As a result, we think it’s unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that Bio-Path Holdings has the funding to invent a new product before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Of course, if you time it right, high risk investments like this can really pay off, as Bio-Path Holdings investors might know.
When it last reported its balance sheet in September 2019, Bio-Path Holdings had cash in excess of all liabilities of US$14m. That’s not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. Given the share price has increased by a solid 76% in the last year , its fair to say investors remain excited about the future, despite the potential need for cash. You can click on the image below to see (in greater detail) how Bio-Path Holdings’s cash levels have changed over time. The image below shows how Bio-Path Holdings’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
It can be extremely risky to invest in a company that doesn’t even have revenue. There’s no way to know its value easily. One thing you can do is check if company insiders are buying shares. If they are buying a significant amount of shares, that’s certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
We’re pleased to report that Bio-Path Holdings shareholders have received a total shareholder return of 184% over one year. There’s no doubt those recent returns are much better than the TSR loss of 57% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It’s always interesting to track share price performance over the longer term. But to understand Bio-Path Holdings better, we need to consider many other factors. Take risks, for example – Bio-Path Holdings has 6 warning signs (and 3 which make us uncomfortable) we think you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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