While Spruce Biosciences, Inc. (NASDAQ:SPRB) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 19% in the last quarter. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. To wit, it had solidly beat the market, up 63%.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
We don't think Spruce Biosciences' revenue of US$1,964,000 is enough to establish significant demand. 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 Spruce Biosciences 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Of course, if you time it right, high risk investments like this can really pay off, as Spruce Biosciences investors might know.
When it last reported its balance sheet in March 2023, Spruce Biosciences had cash in excess of all liabilities of US$87m. 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. With the share price up 117% in the last year , the market is seems hopeful about the potential, despite the cash burn. You can click on the image below to see (in greater detail) how Spruce Biosciences' 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. 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 Spruce Biosciences shareholders have gained 63% over the last year. We regret to report that the share price is down 19% over ninety days. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Spruce Biosciences (of which 1 is potentially serious!) you should know about.
If you are like me, then you will 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 American exchanges.
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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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