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Can You Imagine How Elated Silence Therapeutics' (LON:SLN) Shareholders Feel About Its 427% Share Price Gain?

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Simply Wall St
·3 min read
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Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Silence Therapeutics plc (LON:SLN) shares for the last five years, while they gained 427%. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 18% in about a quarter.

See our latest analysis for Silence Therapeutics

Silence Therapeutics recorded just UK£1,390,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Silence 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 the company needed to issue more shares recently so that it could raise enough money to continue pursuing its business plan. 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 Silence Therapeutics investors might know.

Silence Therapeutics had liabilities exceeding cash when it last reported, according to our data. That put it in the highest risk category, according to our analysis. So the fact that the stock is up 48% per year, over 5 years shows that the cash injection was a welcome one. Investors must really like its potential. You can see in the image below, how Silence Therapeutics' cash levels have changed over time (click to see the values).

debt-equity-history-analysis
debt-equity-history-analysis

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. However you can take a look at whether insiders have been buying up shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.

A Different Perspective

Silence Therapeutics shareholders gained a total return of 32% during the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 39% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Silence Therapeutics has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Silence 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 GB exchanges.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.