Brickell Biotech's(NASDAQ:BBI) Share Price Is Down 16% Over The Past Year.

This month, we saw the Brickell Biotech, Inc. (NASDAQ:BBI) up an impressive 75%. But that is minimal compensation for the share price under-performance over the last year. In fact, the price has declined 16% in a year, falling short of the returns you could get by investing in an index fund.

Check out our latest analysis for Brickell Biotech

Brickell Biotech recorded just US$2,464,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Brickell Biotech comes up with a great new product, before it runs out of money.

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 to raise equity. 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.

Brickell Biotech had cash in excess of all liabilities of just US$12m when it last reported (September 2020). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 16% in the last year. You can see in the image below, how Brickell Biotech's cash levels have changed over time (click to see the values).

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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.

A Different Perspective

Given that the market gained 24% in the last year, Brickell Biotech shareholders might be miffed that they lost 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 27%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. It's always interesting to track share price performance over the longer term. But to understand Brickell Biotech better, we need to consider many other factors. To that end, you should learn about the 6 warning signs we've spotted with Brickell Biotech (including 2 which are concerning) .

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 US 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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