Such Is Life: How Galmed Pharmaceuticals (NASDAQ:GLMD) Shareholders Saw Their Shares Drop 54%
Galmed Pharmaceuticals Ltd. (NASDAQ:GLMD) shareholders should be happy to see the share price up 25% in the last month. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 54% in that time. So we're not so sure if the recent bounce should be celebrated. Of course, this could be the start of a turnaround.
Check out our latest analysis for Galmed Pharmaceuticals
With zero revenue generated over twelve months, we don't think that Galmed Pharmaceuticals has proved its business plan yet. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Galmed Pharmaceuticals comes up with a great new product, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty 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). It certainly is a dangerous place to invest, as Galmed Pharmaceuticals investors might realise.
Galmed Pharmaceuticals has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$68m, when it last reported (December 2019). That allows management to focus on growing the business, and not worry too much about raising capital. But with the share price diving 14% per year, over 5 years , it could be that the price was previously too hyped up. You can click on the image below to see (in greater detail) how Galmed 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. 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
We regret to report that Galmed Pharmaceuticals shareholders are down 48% for the year. Unfortunately, that's worse than the broader market decline of 2.3%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 14% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 5 warning signs for Galmed Pharmaceuticals (1 is concerning) that you should be aware of.
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.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
