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Did You Miss Paradigm Biopharmaceuticals' (ASX:PAR) Whopping 629% Share Price Gain?

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. For example, the Paradigm Biopharmaceuticals Limited (ASX:PAR) share price is up a whopping 629% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. The last week saw the share price soften some 3.8%.

It really delights us to see such great share price performance for investors.

Check out our latest analysis for Paradigm Biopharmaceuticals

Paradigm Biopharmaceuticals recorded just AU$3,076,369 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Paradigm Biopharmaceuticals 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. Some Paradigm Biopharmaceuticals investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.

When it last reported its balance sheet in December 2020, Paradigm Biopharmaceuticals could boast a strong position, with cash in excess of all liabilities of AU$80m. That allows management to focus on growing the business, and not worry too much about raising capital. And with the share price up 37% per year, over 5 years , the market is focussed on that blue sky potential. You can click on the image below to see (in greater detail) how Paradigm Biopharmaceuticals' cash levels have changed over time.

debt-equity-history-analysis
debt-equity-history-analysis

Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Paradigm Biopharmaceuticals' total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Paradigm Biopharmaceuticals hasn't been paying dividends, but its TSR of 646% exceeds its share price return of 629%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

It's nice to see that Paradigm Biopharmaceuticals shareholders have received a total shareholder return of 71% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 49% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Paradigm Biopharmaceuticals you should know about.

If you are like me, then you will 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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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