Shareholders Are Thrilled That The Exopharm (ASX:EX1) Share Price Increased 188%

When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! Take, for example Exopharm Limited (ASX:EX1). Its share price is already up an impressive 188% in the last twelve months. It's also good to see the share price up 124% over the last quarter. We'll need to follow Exopharm for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.

Check out our latest analysis for Exopharm

We don't think Exopharm's revenue of AU$2,665,473 is enough to establish significant demand. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Exopharm 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. You should be aware that the company needed to issue more shares recently so that it could raise enough money to continue pursuing its business plan. 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. Some Exopharm investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

Exopharm only just had cash in excess of all liabilities when it last reported. So it is a good thing that the company has looked to remedy the situation by raising more capital recently. Given the current cash position, investors must really like its potential for the share price to be up 75% in the last year. The image below shows how Exopharm's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.

A Different Perspective

It's nice to see that Exopharm shareholders have gained 188% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 124% in that time. This suggests the company is continuing to win over new investors. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 5 warning signs we've spotted with Exopharm (including 1 which makes us a bit uncomfortable) .

Exopharm 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 AU exchanges.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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