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It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For example, the Adverum Biotechnologies, Inc. (NASDAQ:ADVM) share price has soared 257% in the last three years. How nice for those who held the stock! It’s also good to see the share price up 127% over the last quarter.
View our latest analysis for Adverum Biotechnologies
Adverum Biotechnologies recorded just US$1,396,000 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. 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 Adverum Biotechnologies has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 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). Of course, if you time it right, high risk investments like this can really pay off, as Adverum Biotechnologies investors might know.
Adverum Biotechnologies had cash in excess of all liabilities of US$157m when it last reported (March 2019). That’s not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price up 53% per year, over 3 years, the market is seems hopeful about the potential, despite the cash burn. You can click on the image below to see (in greater detail) how Adverum Biotechnologies’s cash levels have changed over time.
It can be extremely risky to invest in a company that doesn’t even have revenue. There’s no way to know its value easily. However you can take a look at whether insiders have been buying up shares. It’s usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
It’s nice to see that Adverum Biotechnologies shareholders have gained 124% (in total) over the last year. So this year’s TSR was actually better than the three-year TSR (annualized) of 53%. Given the track record of solid returns over varying time frames, it might be worth putting Adverum Biotechnologies on your watchlist. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do 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 US exchanges.
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.
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. Thank you for reading.