Did You Miss XOMA's (NASDAQ:XOMA) Impressive 140% Share Price Gain?

It might be of some concern to shareholders to see the XOMA Corporation (NASDAQ:XOMA) share price down 17% in the last month. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 140% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend.

See our latest analysis for XOMA

XOMA recorded just US$2,226,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 XOMA comes up with a great new product, before it runs out of money.

Companies that lack both meaningful revenue and profits are usually considered high risk. There was already a significant chance that they would need more money for business development, and indeed they recently put themselves at the mercy of capital markets and raised 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. Some XOMA investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

XOMA had liabilities exceeding cash when it last reported, according to our data. That made it extremely high risk, in our view. So the fact that the stock is up 87% per year, over 5 years shows that the cash injection was a welcome one. It's clear more than a few people believe in the potential. You can click on the image below to see (in greater detail) how XOMA's cash levels have changed over time.

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. Given that situation, many of the best investors like to check if insiders have been buying shares. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.

A Different Perspective

It's good to see that XOMA has rewarded shareholders with a total shareholder return of 59% in the last twelve months. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand XOMA better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for XOMA you should know about.

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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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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