Inovio Pharmaceuticals, Inc. (NASDAQ:INO) shareholders have seen the share price descend 30% over the month. But that doesn't detract from the splendid returns of the last year. Like an eagle, the share price soared 294% in that time. So some might not be surprised to see the price retrace some. Only time will tell if there is still too much optimism currently reflected in the share price.
We don't think Inovio Pharmaceuticals' revenue of US$2,740,812 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 Inovio Pharmaceuticals comes up with a great new product, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. 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. Some Inovio 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.
When it last reported its balance sheet in June 2020, Inovio Pharmaceuticals had cash in excess of all liabilities of US$115m. While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. Given the share price has increased by a solid 59% in the last year , it's fair to say investors remain excited about the future, despite the potential need for cash. You can click on the image below to see (in greater detail) how Inovio 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. 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 Inovio Pharmaceuticals shareholders have received a total shareholder return of 294% over the last year. That's better than the annualised return of 6.1% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Inovio Pharmaceuticals has 4 warning signs (and 1 which is concerning) we think you should know about.
Of course Inovio Pharmaceuticals may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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