The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. For example, the Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) share price is up 38% in the last year, clearly besting than the market return of around -1.0% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! We’ll need to follow Eiger BioPharmaceuticals for a while to get a better sense of its share price trend, since it hasn’t been listed for particularly long.
With zero revenue generated over twelve months, we Eiger BioPharmaceuticals has proved its business plan yet. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Eiger BioPharmaceuticals has the funding to invent a new product before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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.
When it reported in September 2018 Eiger BioPharmaceuticals had minimal net cash consider its expenditure: just US$31m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. It’s a testament to the popularity of the business plan that the share price gained 38% in the last year, despite the weak balance sheet. The image belows shows how Eiger BioPharmaceuticals’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
Of course, the truth is that it is hard to value companies without much revenue or profit. However you can take a look at whether insiders have been buying up shares. If they are buying a significant amount of shares, that’s certainly a good thing. You can click here to see if there are insiders buying.
A Different Perspective
It’s nice to see that Eiger BioPharmaceuticals shareholders have gained 38% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 18% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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.
Eiger BioPharmaceuticals 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 firstname.lastname@example.org. 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.