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Did You Manage To Avoid Anatara Lifesciences's (ASX:ANR) Devastating 77% Share Price Drop?

Simply Wall St

Anatara Lifesciences Limited (ASX:ANR) shareholders should be happy to see the share price up 20% in the last month. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 77%. So it's about time shareholders saw some gains. Of course the real question is whether the business can sustain a turnaround.

See our latest analysis for Anatara Lifesciences

Anatara Lifesciences recorded just AU$663,405 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Anatara Lifesciences has the funding to invent a new product before too long.

Companies that lack both meaningful revenue and profits are usually considered 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as Anatara Lifesciences investors might realise.

Anatara Lifesciences had cash in excess of all liabilities of AU$4.9m when it last reported (June 2019). 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. With the share price down 39% per year, over 3 years , it seems likely that the need for cash is weighing on investors' minds. You can see in the image below, how Anatara Lifesciences's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how Anatara Lifesciences's cash levels have changed over time.

ASX:ANR Historical Debt, December 31st 2019

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? 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

Anatara Lifesciences shareholders are down 48% for the year, but the market itself is up 25%. 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 7.3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before spending more time on Anatara Lifesciences it might be wise to click here to see if insiders have been buying or selling shares.

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 AU exchanges.

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.

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. Thank you for reading.