Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
It hasn’t been the best quarter for Galmed Pharmaceuticals Ltd. (NASDAQ:GLMD) shareholders, since the share price has fallen 27% in that time. But over three years, the returns would have left most investors smiling After all, the share price is up a market-beating 51% in that time.
We don’t think Galmed Pharmaceuticals’s revenue of US$1,770,000 is enough to establish significant demand. 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 Galmed Pharmaceuticals comes up with a great new treatment, 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. 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 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 Galmed Pharmaceuticals investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.
Galmed Pharmaceuticals has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$84m, when it last reported (March 2019). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And given that the share price has shot up 15% per year, over 3 years, its fair to say investors are liking management’s vision for the future. You can click on the image below to see (in greater detail) how Galmed Pharmaceuticals’s cash levels have changed over time.
In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. It’s often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
Galmed Pharmaceuticals shareholders are down 3.9% for the year, but the market itself is up 2.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 4.2% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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.