Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Dyadic International, Inc. (NASDAQ:DYAI) shares for the last five years, while they gained 462%. And this is just one example of the epic gains achieved by some long term investors. And in the last week the share price has popped 11%.
With just US$1,934,783 worth of revenue in twelve months, we don't think the market considers Dyadic International to have proven its business plan. 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 Dyadic International has the funding to invent a new product 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. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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. Of course, if you time it right, high risk investments like this can really pay off, as Dyadic International investors might know.
When it last reported its balance sheet in September 2019, Dyadic International could boast a strong position, with cash in excess of all liabilities of US$34m. That allows management to focus on growing the business, and not worry too much about raising capital. And with the share price up 45% 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 Dyadic International's cash levels have changed over time. The image below shows how Dyadic International's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. 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.
A Different Perspective
It's nice to see that Dyadic International shareholders have received a total shareholder return of 114% over the last year. That's better than the annualised return of 41% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Dyadic International better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Dyadic International (of which 1 shouldn't be ignored!) you should know about.
But note: Dyadic International may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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. Thank you for reading.