iBio's (NYSEMKT:IBIO) Wonderful 324% Share Price Increase Shows How Capitalism Can Build Wealth

Some iBio, Inc. (NYSEMKT:IBIO) shareholders are probably rather concerned to see the share price fall 43% over the last three months. But that doesn't change the fact that the returns over the last year have been spectacular. Indeed, the share price is up a whopping 324% in that time. So we wouldn't blame sellers for taking some profits. Of course, winners often do keep winning, so there may be more gains to come (if the business fundamentals stack up).

View our latest analysis for iBio

iBio recorded just US$1,940,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 iBio 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 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). iBio has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

iBio had cash in excess of all liabilities of US$46m when it last reported (September 2020). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price up 56% in the last year , the market is seems hopeful about the potential, despite the cash burn. The image below shows how iBio's 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. One thing you can do is check if company insiders are buying shares. It's often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.

A Different Perspective

We're pleased to report that iBio shareholders have received a total shareholder return of 324% over one year. Notably the five-year annualised TSR loss of 12% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - iBio has 4 warning signs (and 2 which are significant) we think you should know about.

We will like iBio better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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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