Did Changing Sentiment Drive Pluristem Therapeutics's (NASDAQ:PSTI) Share Price Down A Painful 86%?
Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. Imagine if you held Pluristem Therapeutics Inc. (NASDAQ:PSTI) for half a decade as the share price tanked 86%. And we doubt long term believers are the only worried holders, since the stock price has declined 71% over the last twelve months. The falls have accelerated recently, with the share price down 34% in the last three months.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
View our latest analysis for Pluristem Therapeutics
With just US$54,000 worth of revenue in twelve months, we don't think the market considers Pluristem Therapeutics to have proven its business plan. 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 Pluristem Therapeutics has the funding to invent a new product 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. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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. It certainly is a dangerous place to invest, as Pluristem Therapeutics investors might realise.
Pluristem Therapeutics had cash in excess of all liabilities of just US$433k when it last reported (March 2019). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 33% per year, over 5 years. The image below shows how Pluristem Therapeutics's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how Pluristem Therapeutics's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Pluristem Therapeutics shareholders are down 71% for the year, but the market itself is up 2.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 33% over the last half decade. We realise that Buffett 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 businesses. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
