Bio-Path Holdings, Inc. (NASDAQ:BPTH) shareholders will doubtless be very grateful to see the share price up 612% in the last quarter. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 97%. So we're relieved for long term holders to see a bit of uplift. Of course the real question is whether the business can sustain a turnaround.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
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Bio-Path Holdings recorded just US$37,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. You have to wonder why venture capitalists aren't funding it. 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 Bio-Path Holdings 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. 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. Bio-Path Holdings has already given some investors a taste of the bitter losses that high risk investing can cause.
Our data indicates that Bio-Path Holdings had net debt of US$113,000 when it last reported in December 2018. That makes it extremely high risk, in our view. But since the share price has dived -70% per year, over 3 years, it looks like some investors think it's time to abandon ship, so to speak. The image below shows how Bio-Path Holdings'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. 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 costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Bio-Path Holdings shareholders are down 58% for the year, but the market itself is up 3.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 51% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. You could get a better understanding of Bio-Path Holdings's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course Bio-Path Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.