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Hansa Biopharma's (STO:HNSA) Incredible 1038% Share Price Run Shows What Is Possible With Stocks

Simply Wall St

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It hasn't been the best quarter for Hansa Biopharma AB (publ) (STO:HNSA) shareholders, since the share price has fallen 22% in that time. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 1038%. Impressive! So it might be that some shareholders are taking profits after good performance. Only time will tell if there is still too much optimism currently reflected in the share price.

We love happy stories like this one. The company should be really proud of that performance!

Check out our latest analysis for Hansa Biopharma

We don't think Hansa Biopharma's revenue of kr3,687,000 is enough to establish significant demand. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Hansa Biopharma comes up with a great new treatment, 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 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). Of course, if you time it right, high risk investments like this can really pay off, as Hansa Biopharma investors might know.

When it last reported its balance sheet in March 2019, Hansa Biopharma had cash in excess of all liabilities of kr696m. While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price up 63% per year, over 5 years, the market is seems hopeful about the potential, despite the cash burn. The image below shows how Hansa Biopharma's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

OM:HNSA Historical Debt, June 18th 2019

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. 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).

What about the Total Shareholder Return (TSR)?

We've already covered Hansa Biopharma'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 Hansa Biopharma's TSR, at 1098% is higher than its share price return of 1038%. 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

While the broader market gained around 8.5% in the last year, Hansa Biopharma shareholders lost 19%. 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. On the bright side, long term shareholders have made money, with a gain of 64% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

There are plenty of other companies that have insiders buying up shares. You probably do 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 SE 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 editorial-team@simplywallst.com. 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.