Did Changing Sentiment Drive Soleno Therapeutics's (NASDAQ:SLNO) Share Price Down By 44%?
Soleno Therapeutics, Inc. (NASDAQ:SLNO) shareholders will doubtless be very grateful to see the share price up 32% in the last quarter. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 44% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
View our latest analysis for Soleno Therapeutics
Soleno Therapeutics hasn't yet reported any revenue, so it's as much a business idea as an actual business. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Soleno Therapeutics comes up with a great new product, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty 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. 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.
When it reported in March 2019 Soleno Therapeutics had minimal cash in excess of all liabilities consider its expenditure: just US$5.0m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 17% per year, over 3 years. The image below shows how Soleno Therapeutics's balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how Soleno Therapeutics's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Pleasingly, Soleno Therapeutics's total shareholder return last year was 9.7%. This recent result is much better than the 17% drop suffered by shareholders each year (on average) over the last three. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Soleno Therapeutics by clicking this link.
Soleno Therapeutics 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 US exchanges.
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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.
