Over the last month the Calithera Biosciences, Inc. (NASDAQ:CALA) has been much stronger than before, rebounding by 38%. But that is little comfort to those holding over the last half decade, sitting on a big loss. Indeed, the share price is down 64% in the period. So we're not so sure if the recent bounce should be celebrated. But it could be that the fall was overdone.
Calithera Biosciences hasn't yet reported any revenue, so it's as much a business idea as an actual business. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Calithera Biosciences 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 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Calithera Biosciences has already given some investors a taste of the bitter losses that high risk investing can cause.
Calithera Biosciences had cash in excess of all liabilities of US$108m when it last reported (September 2019). 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 down 19% per year, over 5 years , it seems likely that the need for cash is weighing on investors' minds. The image below shows how Calithera Biosciences's balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how Calithera Biosciences's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Calithera Biosciences shareholders are down 11% for the year, but the market itself is up 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 19% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Calithera Biosciences is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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