While not a mind-blowing move, it is good to see that the Mustang Bio, Inc. (NASDAQ:MBIO) share price has gained 13% in the last three months. But that doesn’t change the fact that the returns over the last year have been disappointing. During that time the share price has sank like a stone, descending 66%. It’s not that amazing to see a bounce after a drop like that. Of course, it could be that the fall was overdone.
With just US$50,000 worth of revenue in twelve months, we don’t think the market considers Mustang Bio to have proven its business plan. You have to wonder why venture capitalists aren’t funding it. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Mustang Bio has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered 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. It certainly is a dangerous place to invest, as Mustang Bio investors might realise.
Mustang Bio had net cash of US$36m when it last reported (September 2018). That’s not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. We’d venture that shareholders are concerned about the need for more capital, because the share price has dropped 66% in the last year. You can see in the image below, how Mustang Bio’s cash and debt levels have changed over time (click to see the values).
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
Given that the market gained 0.9% in the last year, Mustang Bio shareholders might be miffed that they lost 66%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It’s great to see a nice little 13% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it’s the start of a new trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
Mustang Bio is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.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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