Did Changing Sentiment Drive Galmed Pharmaceuticals' (NASDAQ:GLMD) Share Price Down By 46%?
Galmed Pharmaceuticals Ltd. (NASDAQ:GLMD) shareholders should be happy to see the share price up 29% in the last quarter. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 46% in that half decade.
Check out our latest analysis for Galmed Pharmaceuticals
With zero revenue generated over twelve months, we don't think that Galmed Pharmaceuticals has proved its business plan yet. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Galmed Pharmaceuticals 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
When it last reported its balance sheet in March 2020, Galmed Pharmaceuticals could boast a strong position, with cash in excess of all liabilities of US$63m. That allows management to focus on growing the business, and not worry too much about raising capital. But with the share price diving 12% per year, over 5 years , it could be that the price was previously too hyped up. You can click on the image below to see (in greater detail) how Galmed Pharmaceuticals's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. 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. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While the broader market gained around 14% in the last year, Galmed Pharmaceuticals shareholders lost 4.8%. 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 12% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with Galmed Pharmaceuticals (including 1 which is is a bit concerning) .
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.
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