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The truth is that if you invest for long enough, you’re going to end up with some losing stocks. But the last three years have been particularly tough on longer term Minerva Neurosciences, Inc. (NASDAQ:NERV) shareholders. Regrettably, they have had to cope with a 56% drop in the share price over that period. The more recent news is of little comfort, with the share price down 39% in a year. The falls have accelerated recently, with the share price down 33% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
With zero revenue generated over twelve months, we don’t think that Minerva Neurosciences has proved its business plan yet. You have to wonder why venture capitalists aren’t funding it. As a result, we think it’s unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. For example, they may be hoping that Minerva Neurosciences comes up with a great new treatment, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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 Minerva Neurosciences investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it reported in March 2019 Minerva Neurosciences had minimal cash in excess of all liabilities consider its expenditure: just US$27m to be specific. So if it hasn’t remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 24% per year, over 3 years. The image below shows how Minerva Neurosciences’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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 only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Over the last year, Minerva Neurosciences shareholders took a loss of 39%. In contrast the market gained about 4.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 24% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Minerva Neurosciences by clicking this link.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.