BioCardia, Inc. (NASDAQ:BCDA) shareholders should be happy to see the share price up 21% in the last month. But that doesn't change the fact that the returns over the last year have been stomach churning. During that time the share price has plummeted like a stone, down 80%. Arguably, the recent bounce is to be expected after such a bad drop. Only time will tell if the company can sustain the turnaround.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
We don't think BioCardia's revenue of US$489,000 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 BioCardia has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. 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). Some BioCardia investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Our data indicates that BioCardia had US$4.4m more in total liabilities than it had cash, when it last reported in June 2019. That makes it extremely high risk, in our view. But since the share price has dived -80% in the last year , it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how BioCardia's cash levels have changed over time. You can see in the image below, how BioCardia's cash 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. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.
A Different Perspective
Over the last year, BioCardia shareholders took a loss of 80%. In contrast the market gained about 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 38% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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.
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