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While not a mind-blowing move, it is good to see that the Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) share price has gained 18% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 46% in the last three years, falling well short of the market return.
Syndax Pharmaceuticals recorded just US$1,517,000 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. 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 Syndax Pharmaceuticals comes up with a great new treatment, before it runs out of money.
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 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).
Syndax Pharmaceuticals had cash in excess of all liabilities of just US$65m when it last reported (March 2019). So if it hasn’t remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 19% per year, over 3 years. You can see in the image below, how Syndax Pharmaceuticals’s cash levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn’t even have revenue. There’s no way to know its value easily. What if insiders are ditching the stock hand over fist? I’d like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Over the last year, Syndax Pharmaceuticals shareholders took a loss of 20%. In contrast the market gained about 3.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 19% 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. 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 Syndax Pharmaceuticals by clicking this link.
Syndax Pharmaceuticals 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.