On average, over time, stock markets tend to rise higher. This makes investing attractive. But if when you choose to buy stocks, some of them will be below average performers. Over the last year the TOT BIOPHARM International Company Limited (HKG:1875) share price is up 11%, but that's less than the broader market return. We'll need to follow TOT BIOPHARM International for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
With just CN¥22,491,000 worth of revenue in twelve months, we don't think the market considers TOT BIOPHARM International to have proven its business plan. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that TOT BIOPHARM International has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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).
TOT BIOPHARM International had cash in excess of all liabilities of just CN¥167m when it last reported (December 2020). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. It's a testament to the popularity of the business plan that the share price gained 158% in the last year , despite the weak balance sheet. You can see in the image below, how TOT BIOPHARM International's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, many of the best investors like to check if insiders have been 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
We're happy to report that TOT BIOPHARM International are up 11% over the year. The bad news is that's no better than the average market return, which was roughly 37%. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 4 warning signs we've spotted with TOT BIOPHARM International (including 2 which don't sit too well with us) .
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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