Should Oncternal Therapeutics (NASDAQ:ONCT) Be Disappointed With Their 81% Profit?

It's been a soft week for Oncternal Therapeutics, Inc. (NASDAQ:ONCT) shares, which are down 13%. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. After all, the share price is up a market-beating 81% in that time.

See our latest analysis for Oncternal Therapeutics

We don't think Oncternal Therapeutics' revenue of US$2,523,000 is enough to establish significant demand. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Oncternal Therapeutics comes up with a great new product, before it runs out of money.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Of course, if you time it right, high risk investments like this can really pay off, as Oncternal Therapeutics investors might know.

When it reported in September 2020 Oncternal Therapeutics had minimal cash in excess of all liabilities consider its expenditure: just US$13m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. Given how low on cash it got, investors must really like its potential for the share price to be up 108% in the last year. You can click on the image below to see (in greater detail) how Oncternal Therapeutics' cash levels have changed over time.

Of course, the truth is that it is hard to value companies without much 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. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

It's nice to see that Oncternal Therapeutics shareholders have gained 81% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 134% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. It's always interesting to track share price performance over the longer term. But to understand Oncternal Therapeutics better, we need to consider many other factors. Take risks, for example - Oncternal Therapeutics has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

Oncternal Therapeutics 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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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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