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Anatara Lifesciences Limited (ASX:ANR) shareholders should be happy to see the share price up 22% in the last month. But that doesn't change the fact that the returns over the last three years have been stomach churning. In that time the share price has melted like a snowball in the desert, down 77%. So we're relieved for long term holders to see a bit of uplift. Of course the real question is whether the business can sustain a turnaround.
Anatara Lifesciences recorded just AU$978,546 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. You have to wonder why venture capitalists aren't funding it. 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. It seems likely some shareholders believe that Anatara Lifesciences 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. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Some Anatara Lifesciences investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Anatara Lifesciences had cash in excess of all liabilities of AU$4.8m when it last reported (December 2018). 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 down 39% per year, over 3 years, it seems likely that the need for cash is weighing on investors' minds. You can click on the image below to see (in greater detail) how Anatara Lifesciences's cash levels have changed over time. You can click on the image below to see (in greater detail) how Anatara Lifesciences's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Anatara Lifesciences shareholders are down 63% for the year, but the broader market is up 10%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 39% 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. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.