The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the Kazia Therapeutics Limited (ASX:KZA) share price is 60% higher than it was a year ago, much better than the market return of around 18% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 38% in three years.
With just AU$1,540,115 worth of revenue in twelve months, we don't think the market considers Kazia Therapeutics to have proven its business plan. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Kazia Therapeutics 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 such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Some Kazia Therapeutics investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.
Kazia Therapeutics had liabilities exceeding cash by AU$1.5m when it last reported in June 2019, according to our data. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 119% in the last year , but we're happy for holders. Investors must really like its potential. You can see in the image below, how Kazia Therapeutics'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 Kazia Therapeutics'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. One thing you can do is check if company insiders are buying shares. It's often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.
A Different Perspective
We're pleased to report that Kazia Therapeutics shareholders have received a total shareholder return of 60% over one year. That certainly beats the loss of about 6.3% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Kazia Therapeutics by clicking this link.
Kazia Therapeutics is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
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. Thank you for reading.