Chimerix (NASDAQ:CMRX) shareholders are up 24% this past week, but still in the red over the last three years

It's nice to see the Chimerix, Inc. (NASDAQ:CMRX) share price up 24% in a week. But that doesn't change the fact that the returns over the last three years have been stomach churning. Indeed, the share price is down a whopping 89% in the last three years. Arguably, the recent bounce is to be expected after such a bad drop. The thing to think about is whether the business has really turned around. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

While the last three years has been tough for Chimerix shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Chimerix

With just US$1,134,000 worth of revenue in twelve months, we don't think the market considers Chimerix to have proven its business plan. 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 Chimerix comes up with a great new product, before it runs out of money.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as Chimerix investors might realise.

Chimerix had cash in excess of all liabilities of US$177m when it last reported (September 2023). 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 down 24% per year, over 3 years , it seems likely that the need for cash is weighing on investors' minds. You can see in the image below, how Chimerix's cash levels have changed over time (click to see the values).

Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.

A Different Perspective

Investors in Chimerix had a tough year, with a total loss of 30%, against a market gain of about 23%. 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 7% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Chimerix you should know about.

Chimerix is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.