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There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the Aligos Therapeutics, Inc. (NASDAQ:ALGS) share price is up 17% in the last year, that falls short of the market return. Aligos Therapeutics hasn't been listed for long, so it's still not clear if it is a long term winner.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
With just US$2,455,000 worth of revenue in twelve months, we don't think the market considers Aligos Therapeutics to have proven its business plan. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Aligos Therapeutics comes up with a great new product, before it runs out of money.
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.
When it last reported its balance sheet in June 2021, Aligos Therapeutics had cash in excess of all liabilities of US$148m. That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. Given the share price has increased by a solid 152% in the last year , it's fair to say investors remain excited about the future, despite the potential need for cash. You can click on the image below to see (in greater detail) how Aligos Therapeutics' cash levels have changed over time.
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. However you can take a look at whether insiders have been buying up shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
Aligos Therapeutics shareholders have gained 17% for the year. While it's always nice to make a profit on the stock market, we do note that the TSR was no better than the broader market return of about 32%. The last three months haven't been great for shareholder returns, since the share price has trailed the market by 6.2% in the last three months. It might be that investors are more concerned about the business lately due to some fundamental change (or else the share price simply got ahead of itself, previously). It's always interesting to track share price performance over the longer term. But to understand Aligos Therapeutics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Aligos Therapeutics (at least 1 which is concerning) , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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