Shareholders in Lipocine (NASDAQ:LPCN) have lost 71%, as stock drops 11% this past week

By
Simply Wall St
Published
April 15, 2022
NasdaqCM:LPCN
Source: Shutterstock

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. Anyone who held Lipocine Inc. (NASDAQ:LPCN) for five years would be nursing their metaphorical wounds since the share price dropped 71% in that time. We also note that the stock has performed poorly over the last year, with the share price down 25%. Unfortunately the share price momentum is still quite negative, with prices down 27% in thirty days.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Check out our latest analysis for Lipocine

Given that Lipocine didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, Lipocine saw its revenue increase by 93% per year. That's better than most loss-making companies. So it's not at all clear to us why the share price sunk 11% throughout that time. You'd have to assume the market is worried that profits won't come soon enough. While there might be an opportunity here, you'd want to take a close look at the balance sheet strength.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
NasdaqCM:LPCN Earnings and Revenue Growth April 15th 2022

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market lost about 0.9% in the twelve months, Lipocine shareholders did even worse, losing 25%. 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 11% 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. 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. Take risks, for example - Lipocine has 3 warning signs we think you should be aware of.

But note: Lipocine 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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