If You Had Bought PhaseBio Pharmaceuticals' (NASDAQ:PHAS) Shares A Year Ago You Would Be Down 28%

This week we saw the PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS) share price climb by 21%. But that doesn't change the fact that the returns over the last year have been less than pleasing. The cold reality is that the stock has dropped 28% in one year, under-performing the market.

See our latest analysis for PhaseBio Pharmaceuticals

PhaseBio Pharmaceuticals recorded just US$1,084,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 PhaseBio Pharmaceuticals 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 do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized).

PhaseBio Pharmaceuticals had liabilities exceeding cash by US$15m when it last reported in September 2020, according to our data. That makes it extremely high risk, in our view. But with the share price diving 28% in the last year , it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how PhaseBio Pharmaceuticals' cash 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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

A Different Perspective

While PhaseBio Pharmaceuticals shareholders are down 28% for the year, the market itself is up 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 8.9%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). 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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with PhaseBio Pharmaceuticals (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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