Even the best investor on earth makes unsuccessful investments. But it’s not unreasonable to try to avoid truly shocking capital losses. We wouldn’t blame Selecta Biosciences, Inc. (NASDAQ:SELB) shareholders if they were still in shock after the stock dropped like a lead balloon, down 87% in just one year. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. We note that it has not been easy for shareholders over three years, either; the share price is down 86% in that time. The falls have accelerated recently, with the share price down 21% 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.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
Selecta Biosciences recorded just US$926,000 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Selecta Biosciences has the funding to invent a new product before too long.
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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Selecta Biosciences investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Our data indicates that Selecta Biosciences had US$4,932,000 more in total liabilities than it had cash, when it last reported in June 2019. That makes it extremely high risk, in our view. But since the share price has dived -87% in the last year, it looks like some investors think it’s time to abandon ship, so to speak. The image below shows how Selecta Biosciences’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
The last twelve months weren’t great for Selecta Biosciences shares, which cost holders 87%, while the market was up about 2.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 48% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. 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. 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.
Selecta Biosciences is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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