The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. For example, the Imugene Limited (ASX:IMU) share price has soared 288% in the last three years. That sort of return is as solid as granite. And in the last month, the share price has gained 29%.
We don't think Imugene's revenue of AU$4,127,281 is enough to establish significant demand. 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 Imugene 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 almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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 Imugene investors might know.
When it last reported its balance sheet in June 2019, Imugene had cash in excess of all liabilities of AU$16m. 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. Given the share price has increased by a solid 60% per year, over 3 years , its fair to say investors remain excited about the future, despite the potential need for cash. You can click on the image below to see (in greater detail) how Imugene's cash levels have changed over time. You can see in the image below, how Imugene's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Imugene's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Imugene's TSR, at 291% is higher than its share price return of 288%. 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
It's nice to see that Imugene shareholders have received a total shareholder return of 48% over the last year. That's better than the annualised return of 23% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before spending more time on Imugene it might be wise to click here to see if insiders have been buying or selling shares.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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.