The Cleveland BioLabs (NASDAQ:CBLI) Share Price Is Down 92% So Some Shareholders Are Rather Upset

Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Cleveland BioLabs, Inc. (NASDAQ:CBLI) during the five years that saw its share price drop a whopping 92%. And some of the more recent buyers are probably worried, too, with the stock falling 64% in the last year. Furthermore, it's down 54% in about a quarter. That's not much fun for holders.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

See our latest analysis for Cleveland BioLabs

With just US$993,906 worth of revenue in twelve months, we don't think the market considers Cleveland BioLabs to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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. It seems likely some shareholders believe that Cleveland BioLabs has the funding to invent a new product before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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). It certainly is a dangerous place to invest, as Cleveland BioLabs investors might realise.

When it reported in June 2019 Cleveland BioLabs had minimal cash in excess of all liabilities consider its expenditure: just US$1.7m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 39% per year, over 5 years . You can see in the image below, how Cleveland BioLabs's cash levels have changed over time (click to see the values). The image below shows how Cleveland BioLabs's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. 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. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

While the broader market gained around 11% in the last year, Cleveland BioLabs shareholders lost 64%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 39% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

Of course Cleveland BioLabs may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.