Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right stock, you can make a lot more than 100%. For example, the Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) share price has soared 147% in the last year. Most would be very happy with that, especially in just one year! Also pleasing for shareholders was the 139% gain in the last three months. It is also impressive that the stock is up 45% over three years, adding to the sense that it is a real winner.
We don't think Infinity Pharmaceuticals' revenue of US$1,591,000 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. It seems likely some shareholders believe that Infinity 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. 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. Infinity Pharmaceuticals has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Infinity Pharmaceuticals had liabilities exceeding cash by US$20m when it last reported in September 2020, according to our data. That puts it in the highest risk category, according to our analysis. So the fact that the stock is up 85% in the last year shows that high risks can lead to high rewards, sometimes. It's clear more than a few people believe in the potential. You can click on the image below to see (in greater detail) how Infinity Pharmaceuticals' 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. 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
We're pleased to report that Infinity Pharmaceuticals shareholders have received a total shareholder return of 147% over one year. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 5 warning signs we've spotted with Infinity Pharmaceuticals (including 1 which shouldn't be ignored) .
But note: Infinity Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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What are the risks and opportunities for Infinity Pharmaceuticals?
Revenue is forecast to grow 44.12% per year
Negative shareholders equity
Does not have a meaningful market cap ($55M)
Does not have meaningful revenue ($3M)
Volatile share price over the past 3 months
Currently unprofitable and not forecast to become profitable over the next 3 years
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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