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It's nice to see the SCYNEXIS, Inc. (NASDAQ:SCYX) share price up 19% in a week. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Indeed, the share price is down a whopping 84% in that time. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The real question is whether the business can leave its past behind and improve itself over the years ahead.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
With just US$257,000 worth of revenue in twelve months, we don't think the market considers SCYNEXIS to have proven its business plan. You have to wonder why venture capitalists aren't funding it. 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 SCYNEXIS will significantly advance the business plan 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. 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. SCYNEXIS has already given some investors a taste of the bitter losses that high risk investing can cause.
SCYNEXIS had cash in excess of all liabilities of just US$5.3m when it last reported (March 2019). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 31% per year, over 5 years. You can see in the image below, how SCYNEXIS's cash levels have changed over time (click to see the values).
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. 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. You can click here to see if there are insiders selling.
A Different Perspective
Investors in SCYNEXIS had a tough year, with a total loss of 26%, against a market gain of about 4.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 31% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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.
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 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.