Introducing Cyclacel Pharmaceuticals (NASDAQ:CYCC), The Stock That Tanked 92%
This month, we saw the Cyclacel Pharmaceuticals, Inc. (NASDAQ:CYCC) up an impressive 99%. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 92% lower after that period. 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.
View our latest analysis for Cyclacel Pharmaceuticals
With just US$150,000 worth of revenue in twelve months, we don't think the market considers Cyclacel Pharmaceuticals to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Cyclacel Pharmaceuticals 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Cyclacel Pharmaceuticals has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in September 2019 Cyclacel Pharmaceuticals had minimal cash in excess of all liabilities consider its expenditure: just US$9.7m to be specific. 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 39% per year, over 5 years . You can click on the image below to see (in greater detail) how Cyclacel Pharmaceuticals's cash levels have changed over time. You can click on the image below to see (in greater detail) how Cyclacel Pharmaceuticals's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Cyclacel Pharmaceuticals shareholders are down 12% for the year, but the market itself is up 20%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 39% 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. You could get a better understanding of Cyclacel Pharmaceuticals's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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