Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Kazia Therapeutics Limited (ASX:KZA) during the five years that saw its share price drop a whopping 86%. Shareholders have had an even rougher run lately, with the share price down 37% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 21% in the same timeframe.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
With just AU$1,397,552 worth of revenue in twelve months, we don't think the market considers Kazia Therapeutics to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Kazia Therapeutics has the funding to invent a new product before too long.
We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that the company needed to issue more shares recently so that it could raise enough money to continue pursuing its business plan. 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 Kazia Therapeutics investors might realise.
Kazia Therapeutics had liabilities exceeding cash when it last reported, according to our data. That made it extremely high risk, in our view. But since the share price has dived -33% per year, over 5 years , it looks like some investors think it's time to abandon ship, so to speak, even though the cash reserves look a little better with the capital raising. You can see in the image below, how Kazia 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. 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. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Although it hurts that Kazia Therapeutics returned a loss of 8.0% in the last twelve months, the broader market was actually worse, returning a loss of 12%. What is more upsetting is the 33% per annum loss investors have suffered over the last half decade. While the losses are slowing we doubt many shareholders are happy with the stock. It's always interesting to track share price performance over the longer term. But to understand Kazia Therapeutics better, we need to consider many other factors. To that end, you should learn about the 6 warning signs we've spotted with Kazia Therapeutics (including 3 which is are concerning) .
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 AU exchanges.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. 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. Thank you for reading.