Did Business Growth Power GeoVax Labs' (NASDAQ:GOVX) Share Price Gain of 111%?

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the GeoVax Labs, Inc. (NASDAQ:GOVX) share price has soared 111% return in just a single year. Better yet, the share price has gained 206% in the last quarter. In contrast, the longer term returns are negative, since the share price is 100% lower than it was three years ago.

See our latest analysis for GeoVax Labs

GeoVax Labs recorded just US$1,840,551 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 GeoVax Labs has the funding to invent a new product before too long.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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. Of course, if you time it right, high risk investments like this can really pay off, as GeoVax Labs investors might know.

GeoVax Labs has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$11m, when it last reported (September 2020). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And with the share price up 96% in the last year , the market is focussed on that blue sky potential. You can see in the image below, how GeoVax Labs' cash levels have changed over time (click to see the values).

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. However you can take a look at whether insiders have been buying up shares. It's often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.

A Different Perspective

It's nice to see that GeoVax Labs shareholders have received a total shareholder return of 111% over the last year. That certainly beats the loss of about 15% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 5 warning signs for GeoVax Labs (1 can't be ignored) that you should be aware of.

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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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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