Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the AlzeCure Pharma AB (publ) (STO:ALZCUR) share price is down 49% in the last year. That contrasts poorly with the market return of 28%. We wouldn't rush to judgement on AlzeCure Pharma because we don't have a long term history to look at.
We don't think AlzeCure Pharma's revenue of kr3,643,000 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. 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. Investors will be hoping that AlzeCure Pharma can make progress and gain better traction for the business, before it runs low on cash.
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.
When it last reported its balance sheet in September 2019, AlzeCure Pharma could boast a strong position, with cash in excess of all liabilities of kr193m. That allows management to focus on growing the business, and not worry too much about raising capital. But since the share price has dropped 49% in the last year , it seems like the market might have been over-excited previously. The image below shows how AlzeCure Pharma's balance sheet has changed over time; if you want to see the precise values, simply click on the image. Look at the image below to see how AlzeCure Pharma's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Given that the market gained 28% in the last year, AlzeCure Pharma shareholders might be miffed that they lost 49%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 5.6% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
We will like AlzeCure Pharma 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 SE exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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