The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it's not unreasonable to try to avoid truly shocking capital losses. So spare a thought for the long term shareholders of Vaccinex, Inc. (NASDAQ:VCNX); the share price is down a whopping 71% in the last twelve months. A loss like this is a stark reminder that portfolio diversification is important. Vaccinex may have better days ahead, of course; we've only looked at a one year period. Even worse, it's down 9.5% in about a month, which isn't fun at all.
With just US$1,475,000 worth of revenue in twelve months, we don't think the market considers Vaccinex to have proven its business plan. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 Vaccinex 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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Vaccinex has already given some investors a taste of the bitter losses that high risk investing can cause.
Vaccinex had cash in excess of all liabilities of just US$21m when it last reported (March 2021). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 71% in the last year. You can click on the image below to see (in greater detail) how Vaccinex's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
A Different Perspective
Given that the market gained 36% in the last year, Vaccinex shareholders might be miffed that they lost 71%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 4.4% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Vaccinex better, we need to consider many other factors. Even so, be aware that Vaccinex is showing 5 warning signs in our investment analysis , and 1 of those is a bit unpleasant...
We will like Vaccinex better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.