These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the InflaRx N.V. (NASDAQ:IFRX) share price is up 63% in the last year, clearly besting than the market return of around -0.6% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! We’ll need to follow InflaRx for a while to get a better sense of its share price trend, since it hasn’t been listed for particularly long.
InflaRx 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. It seems likely some shareholders believe that InflaRx 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. 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 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). InflaRx has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
InflaRx has plenty of cash in the bank, with net cash sitting at €105m, when it last reported (September 2018). That allows management to focus on growing the business, and not worry too much about raising capital. And with the share price up 63% in the last year, the market is focussed on that blue sky potential. You can see in the image below, how InflaRx’s cash and debt levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. One thing you can do is check if company insiders are buying shares. It’s often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.
A Different Perspective
It’s nice to see that InflaRx shareholders have gained 63% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 65% in that time. This suggests the company is continuing to win over new investors. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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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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.