PCI Biotech Holding's (OB:PCIB) Wonderful 413% Share Price Increase Shows How Capitalism Can Build Wealth

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. To wit, the PCI Biotech Holding ASA (OB:PCIB) share price has soared 413% over five years. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 78% gain in the last three months.

View our latest analysis for PCI Biotech Holding

We don't think PCI Biotech Holding's revenue of kr10,247,000 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 PCI Biotech Holding 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. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. PCI Biotech Holding has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

PCI Biotech Holding has plenty of cash in the bank, with cash in excess of all liabilities sitting at kr255m, when it last reported (September 2019). That allows management to focus on growing the business, and not worry too much about raising capital. And given that the share price has shot up 49% per year, over 5 years , its fair to say investors are liking management's vision for the future. You can see in the image below, how PCI Biotech Holding's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how PCI Biotech Holding's cash levels have changed over time.

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. However you can take a look at whether insiders have been buying up shares. If they are buying a significant amount of shares, that's certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between PCI Biotech Holding's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that PCI Biotech Holding's TSR, at 638% is higher than its share price return of 413%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

It's nice to see that PCI Biotech Holding shareholders have received a total shareholder return of 126% over the last year. That's better than the annualised return of 49% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand PCI Biotech Holding better, we need to consider many other factors. For example, we've discovered 5 warning signs for PCI Biotech Holding (1 doesn't sit too well with us!) that you should be aware of before investing here.

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 NO exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.