Imagine Holding Herantis Pharma Oyj (HEL:HRTIS) Shares While The Price Zoomed 511% Higher

Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. But when you hold the right stock for the right time period, the rewards can be truly huge. One bright shining star stock has been Herantis Pharma Oyj (HEL:HRTIS), which is 511% higher than three years ago. In the last week shares have slid back 1.7%.

We love happy stories like this one. The company should be really proud of that performance!

View our latest analysis for Herantis Pharma Oyj

Herantis Pharma Oyj didn’t have any revenue in the last year, so it’s fair to say it doesn’t yet have a proven product (or at least not one people are paying for). 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 Herantis Pharma Oyj will significantly advance the business plan before too long.

Companies that lack both meaningful revenue and profits are usually considered 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 such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Of course, if you time it right, high risk investments like this can really pay off, as Herantis Pharma Oyj investors might know.

Herantis Pharma Oyj had liabilities exceeding cash by €5,051,289 when it last reported in December 2018, according to our data. That makes it extremely high risk, in our view. So the fact that the stock is up 83% per year, over 3 years shows that high risks can lead to high rewards, sometimes. Investors must really like its potential. You can see in the image below, how Herantis Pharma Oyj’s cash levels have changed over time (click to see the values).

HLSE:HRTIS Historical Debt, July 26th 2019
HLSE:HRTIS Historical Debt, July 26th 2019

In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, many of the best investors like to check if insiders have been 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

While the broader market gained around 1.4% in the last year, Herantis Pharma Oyj shareholders lost 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

We will like Herantis Pharma Oyj better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FI 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.