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Corvus Pharmaceuticals, Inc. (NASDAQ:CRVS) shareholders will doubtless be very grateful to see the share price up 52% in the last week. But that is small recompense for the exasperating returns over three years. Tragically, the share price declined 64% in that time. So it is really good to see an improvement. The rise has some hopeful, but turnarounds are often precarious.
Corvus Pharmaceuticals hasn’t yet reported any revenue yet, so it’s as much a business idea as an actual business. You have to wonder why venture capitalists aren’t funding it. 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 Corvus Pharmaceuticals 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). Corvus Pharmaceuticals has already given some investors a taste of the bitter losses that high risk investing can cause.
When it last reported its balance sheet in March 2019, Corvus Pharmaceuticals had cash in excess of all liabilities of US$94m. While that’s nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. We’d venture that shareholders are concerned about the need for more capital, because the share price has dropped 29% per year, over 3 years. You can see in the image below, how Corvus Pharmaceuticals’s cash levels have changed over time (click to see the values).
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? I’d like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Over the last year, Corvus Pharmaceuticals shareholders took a loss of 53%. In contrast the market gained about 8.7%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 29% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Warren Buffett famously said he likes to ‘buy when there is blood on the streets’, he also focusses on high quality stocks with solid prospects. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
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.
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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. Thank you for reading.