The BELLUS Health (TSE:BLU) Share Price Has Soared 881%, Delighting Many Shareholders
For us, stock picking is in large part the hunt for the truly magnificent stocks. You won't get it right every time, but when you do, the returns can be truly splendid. Take, for example, the BELLUS Health Inc. (TSE:BLU) share price, which skyrocketed 881% over three years. It's also up 12% in about a month. We note that BELLUS Health reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.
We love happy stories like this one. The company should be really proud of that performance!
Check out our latest analysis for BELLUS Health
BELLUS Health recorded just US$21,692 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 BELLUS Health 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 is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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). Of course, if you time it right, high risk investments like this can really pay off, as BELLUS Health investors might know.
BELLUS Health had cash in excess of all liabilities of US$73m when it last reported (March 2020). 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. Given the share price has increased by a solid 30% per year, over 3 years , it's fair to say investors remain excited about the future, despite the potential need for cash. You can click on the image below to see (in greater detail) how BELLUS Health'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. 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
It's nice to see that BELLUS Health shareholders have received a total shareholder return of 165% over the last year. That's better than the annualised return of 27% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 5 warning signs we've spotted with BELLUS Health (including 2 which is make us uncomfortable) .
BELLUS Health is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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. Thank you for reading.
