Despite shrinking by US$51m in the past week, Gevo (NASDAQ:GEVO) shareholders are still up 107% over 3 years
It might be of some concern to shareholders to see the Gevo, Inc. ( NASDAQ:GEVO ) share price down 15% in the last month. But that doesn't change the fact that the returns over the last three years have been very strong. In fact, the share price is up a full 107% compared to three years ago. To some, the recent share price pullback wouldn't be surprising after such a good run. If the business can perform well for years to come, then the recent drop could be an opportunity.
In light of the stock dropping 11% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.
Check out our latest analysis for Gevo
Gevo recorded just US$1,175,000 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. It seems likely some shareholders believe that Gevo will refine its biofuels on a commercial scale 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Gevo has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
When it last reported its balance sheet in December 2022, Gevo had cash in excess of all liabilities of US$309m. 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 97% per year, over 3 years , it's fair to say investors remain excited about the future, despite the potential need for cash. You can see in the image below, how Gevo'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. One thing you can do is check if company insiders are buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
We regret to report that Gevo shareholders are down 59% for the year. Unfortunately, that's worse than the broader market decline of 8.3%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Gevo better, we need to consider many other factors. Even so, be aware that Gevo is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant...
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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