The last three months have been tough on IMV Inc. (TSE:IMV) shareholders, who have seen the share price decline a rather worrying 36%. But in three years the returns have been great. The share price marched upwards over that time, and is now 127% higher than it was. To some, the recent share price pullback wouldn’t be surprising after such a good run. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.
We don’t think IMV’s revenue of CA$82,000 is enough to establish significant demand. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that IMV 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. The 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). Some IMV 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
Our data indicates that IMV had net debt of CA$3,713,000 when it last reported in December 2018. That makes it extremely high risk, in our view. So we’re surprised to see the stock up 31% per year, over 3 years, but we’re happy for holders. Investors must really like its potential. You can click on the image below to see (in greater detail) how IMV’s cash and debt levels have changed over time.
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 often positive if so, assuming the buying is sustained and meaningful. 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 7.2% in the last year, IMV shareholders lost 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
IMV is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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 firstname.lastname@example.org. 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.