aXichem AB (STO:AXIC A) shareholders might be concerned after seeing the share price drop 18% in the last month. But over three years the performance has been really wonderful. In fact, the share price has taken off in that time, up 1162%. So the recent fall doesn't do much to dampen our respect for the business. Only time will tell if there is still too much optimism currently reflected in the share price.
We love happy stories like this one. The company should be really proud of that performance!
aXichem hasn't yet reported any revenue, so it's as much a business idea as an actual business. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that aXichem will significantly advance the business plan before too long.
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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Of course, if you time it right, high risk investments like this can really pay off, as aXichem investors might know.
aXichem had cash in excess of all liabilities of kr34m when it last reported (September 2019). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price up 24% per year, over 3 years , the market is seems hopeful about the potential, despite the cash burn. You can see in the image below, how aXichem's cash levels have changed over time (click to see the values). You can see in the image below, how aXichem's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. However you can take a look at whether insiders have been buying up shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between aXichem's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. aXichem hasn't been paying dividends, but its TSR of 1172% exceeds its share price return of 1162%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
aXichem provided a TSR of 1.2% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 44% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Be aware that aXichem is showing 5 warning signs in our investment analysis , and 2 of those are potentially serious...
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 SE exchanges.
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