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Long term investing is the way to go, but that doesn't mean you should hold every stock forever. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Heat Biologics, Inc. (NASDAQ:HTBX) for half a decade as the share price tanked 86%. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days.
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.
We don't think Heat Biologics' revenue of US$2,947,969 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Heat Biologics has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. 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. It certainly is a dangerous place to invest, as Heat Biologics investors might realise.
Heat Biologics has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$103m, when it last reported (December 2020). That allows management to focus on growing the business, and not worry too much about raising capital. But since the share price has dropped 13% per year, over 5 years , it seems like the market might have been over-excited previously. You can see in the image below, how Heat Biologics' cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? It would bother me, that's for sure. You can click here to see if there are insiders selling.
A Different Perspective
It's good to see that Heat Biologics has rewarded shareholders with a total shareholder return of 79% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 13% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Heat Biologics better, we need to consider many other factors. Even so, be aware that Heat Biologics is showing 4 warning signs in our investment analysis , and 1 of those shouldn't be ignored...
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. 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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