Did You Manage To Avoid Idera Pharmaceuticals's (NASDAQ:IDRA) Devastating 88% Share Price Drop?
We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding Idera Pharmaceuticals, Inc. (NASDAQ:IDRA) during the five years that saw its share price drop a whopping 88%. We also note that the stock has performed poorly over the last year, with the share price down 72%. The last week also saw the share price slip down another 11%. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Check out our latest analysis for Idera Pharmaceuticals
Idera Pharmaceuticals recorded just US$1,547,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Idera Pharmaceuticals comes up with a great new product, 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. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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. It certainly is a dangerous place to invest, as Idera Pharmaceuticals investors might realise.
When it reported in September 2019 Idera Pharmaceuticals had minimal cash in excess of all liabilities consider its expenditure: just US$34m 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. That probably explains why the share price is down 34% per year, over 5 years . The image below shows how Idera Pharmaceuticals's balance sheet has changed over time; if you want to see the precise values, simply click on the image. Look at the image below to see how Idera Pharmaceuticals's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much 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 costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Investors in Idera Pharmaceuticals had a tough year, with a total loss of 72%, against a market gain of about 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 34% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
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.
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 editorial-team@simplywallst.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.