Shareholders Are Thrilled That The Nanologica (NGM:NICA) Share Price Increased 115%

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For instance the Nanologica AB (publ) (NGM:NICA) share price is 115% higher than it was three years ago. How nice for those who held the stock! On top of that, the share price is up 65% in about a quarter.

Check out our latest analysis for Nanologica

We don't think Nanologica's revenue of kr16,035,737 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 Nanologica 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. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise 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. Nanologica has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

When it reported in September 2020 Nanologica had minimal cash in excess of all liabilities consider its expenditure: just kr38m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. Given how low on cash it got, investors must really like its potential for the share price to be up 95% per year, over 3 years. You can click on the image below to see (in greater detail) how Nanologica's cash levels have changed over time.

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. You can click here to see if there are insiders buying.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Nanologica's total shareholder return (TSR) and its share price change, which we've covered above. 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 Nanologica's TSR, at 117% is higher than its share price return of 115%. 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

Pleasingly, Nanologica's total shareholder return last year was 85%. That gain actually surpasses the 29% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting Nanologica on your watchlist. 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. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Nanologica (of which 2 are a bit concerning!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE 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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