Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of Achieve Life Sciences, Inc. (NASDAQ:ACHV) have suffered share price declines over the last year. The share price has slid 55% in that time. We wouldn't rush to judgement on Achieve Life Sciences because we don't have a long term history to look at. Unfortunately the share price momentum is still quite negative, with prices down 54% in thirty days.
With zero revenue generated over twelve months, we don't think that Achieve Life Sciences has proved its business plan yet. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Achieve Life Sciences has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 Achieve Life Sciences investors might realise.
When it reported in March 2019 Achieve Life Sciences had minimal cash in excess of all liabilities consider its expenditure: just US$5.4m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 55% in the last year. The image below shows how Achieve Life Sciences'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 Achieve Life Sciences's cash 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. 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. You can click here to see if there are insiders selling.
A Different Perspective
While Achieve Life Sciences shareholders are down 55% for the year, the market itself is up 6.4%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 49%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
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 firstname.lastname@example.org. 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.