It is doubtless a positive to see that the Audentes Therapeutics, Inc. (NASDAQ:BOLD) share price has gained some 39% in the last three months. But in truth the last year hasn’t been good for the share price. In fact the stock is down 10% in the last year, well below the market return.
Audentes Therapeutics hasn’t yet reported any revenue yet, so it’s as much a business idea as a business. You have to wonder why venture capitalists aren’t funding it. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Audentes Therapeutics comes up with a great new treatment, 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 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).
When it last reported its balance sheet in December 2018, Audentes Therapeutics could boast a strong position, with net cash of US$385m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 10% in the last year, it seems like the market might have been over-excited previously. You can click on the image below to see (in greater detail) how Audentes Therapeutics’s cash and debt levels have changed over time.
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 costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Given that the market gained 0.9% in the last year, Audentes Therapeutics shareholders might be miffed that they lost 10%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. Putting aside the last twelve months, it’s good to see the share price has rebounded by 39%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it’s the start of a new trend. If you would like to research Audentes Therapeutics in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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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