Stock Analysis

Further weakness as Lipocine (NASDAQ:LPCN) drops 11% this week, taking five-year losses to 83%

  •  Updated
NasdaqCM:LPCN
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Long term investing is the way to go, but that doesn't mean you should hold every stock forever. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Lipocine Inc. (NASDAQ:LPCN) during the five years that saw its share price drop a whopping 83%. We also note that the stock has performed poorly over the last year, with the share price down 51%. 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. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Lipocine

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Lipocine became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

Revenue is actually up 92% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NasdaqCM:LPCN Earnings and Revenue Growth August 11th 2022

We know that Lipocine has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Lipocine stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market lost about 10% in the twelve months, Lipocine shareholders did even worse, losing 51%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. We realise that Baron Rothschild 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 business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Lipocine , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

What are the risks and opportunities for Lipocine?

Lipocine Inc., a clinical-stage biopharmaceutical company, focuses on the development of pharmaceutical products for the treatment of neuroendocrine and metabolic disorders.

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Rewards

  • Trading at 65.8% below our estimate of its fair value

  • Earnings are forecast to grow 32.19% per year

  • Became profitable this year

Risks

  • Does not have a meaningful market cap ($36M)

View all Risks and Rewards

Share Price

Market Cap

1Y Return

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About NasdaqCM:LPCN

Lipocine

Lipocine Inc., a clinical-stage biopharmaceutical company, focuses on the development of pharmaceutical products for the treatment of neuroendocrine and metabolic disorders.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation5
Future Growth5
Past Performance3
Financial Health6
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet and undervalued.