Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. One bright shining star stock has been Paradigm Biopharmaceuticals Limited (ASX:PAR), which is 385% higher than three years ago. Also pleasing for shareholders was the 88% gain in the last three months.
With just AU$2,983,918 worth of revenue in twelve months, we don't think the market considers Paradigm Biopharmaceuticals to have proven its business plan. 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 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Paradigm Biopharmaceuticals has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
When it last reported its balance sheet in June 2019, Paradigm Biopharmaceuticals could boast a strong position, with cash in excess of all liabilities of AU$76m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And given that the share price has shot up 51% per year, over 3 years , its fair to say investors are liking management's vision for the future. You can click on the image below to see (in greater detail) how Paradigm Biopharmaceuticals's cash levels have changed over time. You can click on the image below to see (in greater detail) how Paradigm Biopharmaceuticals's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither 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. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Paradigm Biopharmaceuticals's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Paradigm Biopharmaceuticals hasn't been paying dividends, but its TSR of 396% exceeds its share price return of 385%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We're pleased to report that Paradigm Biopharmaceuticals rewarded shareholders with a total shareholder return of 239% over the last year. That's better than the annualized TSR of 71% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Paradigm Biopharmaceuticals is not the only stock that insiders are buying. 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.
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.