Further weakness as Verve Therapeutics (NASDAQ:VERV) drops 6.8% this week, taking one-year losses to 33%

It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Verve Therapeutics, Inc. (NASDAQ:VERV) shareholders over the last year, as the share price declined 33%. That contrasts poorly with the market decline of 10%. We wouldn't rush to judgement on Verve Therapeutics because we don't have a long term history to look at. The share price has dropped 34% in three months.

Since Verve Therapeutics has shed US$61m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Verve Therapeutics

Verve Therapeutics recorded just US$1,941,000 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 shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Verve Therapeutics comes up with a great new product, 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 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).

Verve Therapeutics has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$427m, when it last reported (December 2022). That allows management to focus on growing the business, and not worry too much about raising capital. But with the share price diving 33% in the last year , it could be that the price was previously too hyped up. The image below shows how Verve Therapeutics' balance sheet has changed over time; if you want to see the precise values, simply click on the image.

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. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

A Different Perspective

We doubt Verve Therapeutics shareholders are happy with the loss of 33% over twelve months. That falls short of the market, which lost 10%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. It's worth noting that the last three months did the real damage, with a 34% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. It's always interesting to track share price performance over the longer term. But to understand Verve Therapeutics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Verve Therapeutics (at least 1 which is significant) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.