Bio-Gene Technology Limited (ASX:BGT) shareholders have seen the share price descend 13% over the month. But that doesn't change the fact that the returns over the last year have been pleasing. Looking at the full year, the company has easily bested an index fund by gaining 50%.
With just AU$644,605 worth of revenue in twelve months, we don't think the market considers Bio-Gene Technology 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 Bio-Gene Technology will significantly advance the business plan 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.
When it last reported its balance sheet in June 2019, Bio-Gene Technology had cash in excess of all liabilities of AU$3.9m. That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price up 125% in the last year , the market is seems hopeful about the potential, despite the cash burn. You can click on the image below to see (in greater detail) how Bio-Gene Technology's cash levels have changed over time. You can see in the image below, how Bio-Gene Technology's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. One thing you can do is check if company insiders are 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).
A Different Perspective
Bio-Gene Technology shareholders should be happy with the total gain of 50% over the last twelve months. And the share price momentum remains respectable, with a gain of 22% in the last three months. This suggests the company is continuing to win over new investors. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Bio-Gene Technology (at least 2 which can't be ignored) , and understanding them should be part of your investment process.
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 AU exchanges.
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