Caladrius Biosciences, Inc. (NASDAQ:CLBS) shareholders should be happy to see the share price up 19% in the last month. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Like a ship taking on water, the share price has sunk 95% in that time. So we don't gain too much confidence from the recent recovery. The real question is whether the business can leave its past behind and improve itself over the years ahead.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Caladrius Biosciences 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). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Caladrius Biosciences comes up with a great new product, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Some Caladrius Biosciences investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Caladrius Biosciences had cash in excess of all liabilities of US$32m when it last reported (March 2019). 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 down 46% per year, over 5 years, it seems likely that the need for cash is weighing on investors' minds. You can see in the image below, how Caladrius Biosciences'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 Caladrius Biosciences's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Investors in Caladrius Biosciences had a tough year, with a total loss of 46%, against a market gain of about 6.5%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 46% per year over five years. 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 might want to assess this data-rich visualization of its earnings, revenue and cash flow.
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 US exchanges.
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