Biomark Diagnostics Inc (FRA:20B) has rebounded strongly over the last week, with the share price soaring 140% But that doesn’t change the fact that the returns over the last three years have been disappointing. In that time, the share price dropped 69%. So it’s good to see it climbing back up. The rise has some hopeful, but turnarounds are often precarious.
Biomark Diagnostics hasn’t yet reported any revenue yet, so it’s as much a business idea as a business. This state of affairs suggests that venture capitalists won’t provide funds on attractive terms. 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 Biomark Diagnostics has the funding to invent a new product before too long.
As a general rule, if a company doesn’t have much revenue, and it loses money, then it is a high risk investment. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as Biomark Diagnostics investors might realise.
Biomark Diagnostics had net debt of CA$1,112,684 when it last reported in December 2018, according to our data. That puts it in the highest risk category, according to our analysis. But with the share price diving 32% per year, over 3 years, it’s probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Biomark Diagnostics’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. 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. You can click here to see if there are insiders selling.
A Different Perspective
Biomark Diagnostics shareholders are down 37% for the year, falling short of the market return. The market shed around 7.1%, no doubt weighing on the stock price. Shareholders have lost 32% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Warren Buffett famously said he likes to ‘buy when there is blood on the streets’, he also focusses on high quality stocks with solid prospects. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
We will like Biomark Diagnostics 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 DE exchanges.
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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.