Is BELLUS Health’s (TSE:BLU) Share Price Gain Of 244% Well Earned?
Unfortunately, investing is risky – companies can and do go bankrupt. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the BELLUS Health Inc. (TSE:BLU) share price has soared 244% return in just a single year. Also pleasing for shareholders was the 53% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. However, the longer term returns haven’t been so impressive, with the stock up just 3.1% in the last three years.
Check out our latest analysis for BELLUS Health
BELLUS Health recorded just CA$35,000 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 BELLUS Health comes up with a great new treatment, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. The is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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 BELLUS Health 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
When it last reported its balance sheet in December 2018, BELLUS Health could boast a strong position, with net cash of CA$46m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And with the share price up 244% in the last year, the market is focussed on that blue sky potential. You can see in the image below, how BELLUS Health’s cash and debt levels have changed over time (click to see the values).
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. 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).
A Different Perspective
It’s good to see that BELLUS Health has rewarded shareholders with a total shareholder return of 244% in the last twelve months. That gain is better than the annual TSR over five years, which is 14%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
BELLUS Health is not the only stock that insiders are buying. 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 CA 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 editorial-team@simplywallst.com. 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.
