While not a mind-blowing move, it is good to see that the ExpreS2ion Biotech Holding AB (publ) (STO:EXPRS2) share price has gained 11% in the last three months. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 39% in the last three years, significantly under-performing the market.
With just kr11,653,000 worth of revenue in twelve months, we don't think the market considers ExpreS2ion Biotech Holding to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 ExpreS2ion Biotech Holding has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt.
Our data indicates that ExpreS2ion Biotech Holding had kr10m more in total liabilities than it had cash, when it last reported in September 2019. That makes it extremely high risk, in our view. But with the share price diving 15% per year, over 3 years , it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how ExpreS2ion Biotech Holding's cash levels have changed over time. The image below shows how ExpreS2ion Biotech Holding'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, would you be concerned if it turned out insiders were relentlessly selling stock? 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.
What about the Total Shareholder Return (TSR)?
We've already covered ExpreS2ion Biotech Holding's share price action, but we should also mention its total shareholder return (TSR). 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. We note that ExpreS2ion Biotech Holding's TSR, at -37% is higher than its share price return of -39%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
The last twelve months weren't great for ExpreS2ion Biotech Holding shares, which cost holders 15%, while the market was up about 28%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 14% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. If you would like to research ExpreS2ion Biotech Holding in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE exchanges.
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.
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