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It hasn't been the best quarter for Magenta Therapeutics, Inc. (NASDAQ:MGTA) shareholders, since the share price has fallen 13% in that time. But that doesn't change the fact that the returns over the last year have been pleasing. After all, the share price is up a market-beating 12% in that time.
Magenta Therapeutics 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). 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. For example, they may be hoping that Magenta Therapeutics comes up with a great new product, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered 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.
When it last reported its balance sheet in March 2019, Magenta Therapeutics had cash in excess of all liabilities of US$114m. 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 12% in the last year, the market is seems hopeful about the potential, despite the cash burn. You can see in the image below, how Magenta Therapeutics'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. However you can take a look at whether insiders have been buying up shares. If they are buying a significant amount of shares, that's certainly a good thing. You can click here to see if there are insiders buying.
A Different Perspective
It's nice to see that Magenta Therapeutics shareholders have gained 12% over the last year. We regret to report that the share price is down 13% over ninety days. Shorter term share price moves often don't signify much about the business itself. 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 Magenta Therapeutics by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.