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Does Tricida's (NASDAQ:TCDA) Share Price Gain of 35% Match Its Business Performance?

Simply Wall St

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Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Tricida, Inc. (NASDAQ:TCDA) share price is 35% higher than it was a year ago, much better than the market return of around 4.6% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! We'll need to follow Tricida for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.

Check out our latest analysis for Tricida

Tricida didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. Investors will be hoping that Tricida can make progress and gain better traction for the business, before it runs low on cash.

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.

Tricida had cash in excess of all liabilities of US$154m when it last reported (March 2019). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price up 35% in the last year, the market is seems hopeful about the potential, despite the cash burn. You can see in the image below, how Tricida'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 Tricida's cash levels have changed over time.

NasdaqGS:TCDA Historical Debt, June 27th 2019
NasdaqGS:TCDA Historical Debt, June 27th 2019

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. One thing you can do is check if company insiders are buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.

A Different Perspective

Tricida boasts a total shareholder return of 35% for the last year. We regret to report that the share price is down 9.2% over ninety days. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.