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Did You Manage To Avoid Lipocine's (NASDAQ:LPCN) Devastating 81% Share Price Drop?

Simply Wall St

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While not a mind-blowing move, it is good to see that the Lipocine Inc. (NASDAQ:LPCN) share price has gained 17% in the last three months. But only the myopic could ignore the astounding decline over three years. To wit, the share price sky-dived 81% in that time. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still.

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.

Check out our latest analysis for Lipocine

Lipocine recorded just US$428,031 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Lipocine will significantly advance the business plan 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 such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). It certainly is a dangerous place to invest, as Lipocine investors might realise.

When it reported in December 2018 Lipocine had minimal net cash consider its expenditure: just US$3.8m 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 42% per year, over 3 years. You can click on the image below to see (in greater detail) how Lipocine's cash levels have changed over time.

NasdaqCM:LPCN Historical Debt, April 29th 2019

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

We're pleased to report that Lipocine shareholders have received a total shareholder return of 18% over one year. There's no doubt those recent returns are much better than the TSR loss of 25% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

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.

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.