For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that’s been the case for longer term Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) shareholders, since the share price is down 38% in the last three years, falling well short of the market return of around 47%. Unfortunately the share price momentum is still quite negative, with prices down 14% in thirty days.
We don’t think Syndax Pharmaceuticals’s revenue of US$1,517,000 is enough to establish significant demand. We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Syndax Pharmaceuticals comes up with a great new product, before it runs out of money.
As a general rule, if a company doesn’t have much revenue, and it loses money, then it is a high risk investment. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
When it reported in June 2019 Syndax Pharmaceuticals had minimal cash in excess of all liabilities consider its expenditure: just US$52m to be specific. So if it hasn’t remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 15% per year, over 3 years . You can see in the image below, how Syndax Pharmaceuticals’s cash levels have changed over time (click to see the values). You can see in the image below, how Syndax Pharmaceuticals’s cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? I’d like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
We’re pleased to report that Syndax Pharmaceuticals rewarded shareholders with a total shareholder return of 26% over the last year. This recent result is much better than the 15% drop suffered by shareholders each year (on average) over the last three. We’re generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. 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 Syndax Pharmaceuticals by clicking this link.
Syndax Pharmaceuticals 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 email@example.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.