Investing in stocks comes with the risk that the share price will fall. And unfortunately for Corvus Pharmaceuticals, Inc. (NASDAQ:CRVS) shareholders, the stock is a lot lower today than it was a year ago. In that relatively short period, the share price has plunged 58%. We wouldn’t rush to judgement on Corvus Pharmaceuticals because we don’t have a long term history to look at. The falls have accelerated recently, with the share price down 29% in the last three months.
Corvus Pharmaceuticals didn’t have any revenue in the last year, so it’s fair to say it doesn’t yet have a proven product (or at least not one people are paying for). You have to wonder why venture capitalists aren’t funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Corvus Pharmaceuticals comes up with a great new treatment, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. The is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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). Some Corvus Pharmaceuticals investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Corvus Pharmaceuticals had net cash of US$114m when it last reported (September 2018). 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. We’d venture that shareholders are concerned about the need for more capital, because the share price has dropped 58% in the last year. You can see in the image below, how Corvus Pharmaceuticals’s cash and debt 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 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 Corvus Pharmaceuticals shareholders are down 58% for the year, the market itself is up 0.9%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 29%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Corvus Pharmaceuticals by clicking this link.
Corvus Pharmaceuticals is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.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 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.