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It is doubtless a positive to see that the G1 Therapeutics, Inc. (NASDAQ:GTHX) share price has gained some 55% in the last three months. But that doesn’t change the fact that the returns over the last year have been less than pleasing. The cold reality is that the stock has dropped 43% in one year, under-performing the market.
Check out our latest analysis for G1 Therapeutics
With zero revenue generated over twelve months, we don’t think that G1 Therapeutics has proved its business plan yet. We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? 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. For example, they may be hoping that G1 Therapeutics comes up with a great new product, before it runs out of money.
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.
When it last reported its balance sheet in March 2019, G1 Therapeutics could boast a strong position, with cash in excess of all liabilities of US$335m. That allows management to focus on growing the business, and not worry too much about raising capital. But since the share price has dropped 43% in the last year, it seems like the market might have been over-excited previously. The image below shows how G1 Therapeutics’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I’d like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Given that the market gained 6.2% in the last year, G1 Therapeutics shareholders might be miffed that they lost 43%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. It’s great to see a nice little 55% rebound in the last three months. Let’s just hope this isn’t the widely-feared ‘dead cat bounce’ (which would indicate further declines to come). Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of G1 Therapeutics by clicking this link.
G1 Therapeutics is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.