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While it may not be enough for some shareholders, we think it is good to see the Mustang Bio, Inc. (NASDAQ:MBIO) share price up 11% in a single quarter. But that's not enough to compensate for the decline over the last twelve months. During that time the share price has sank like a stone, descending 52%. The share price recovery is not so impressive when you consider the fall. It may be that the fall was an overreaction.
With just US$50,000 worth of revenue in twelve months, we don't think the market considers Mustang Bio 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? 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. For example, they may be hoping that Mustang Bio comes up with a great new product, before it runs out of money.
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 Mustang Bio investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it reported in March 2019 Mustang Bio had minimal cash in excess of all liabilities consider its expenditure: just US$19m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 52% in the last year. You can click on the image below to see (in greater detail) how Mustang Bio's cash levels have changed over time. You can click on the image below to see (in greater detail) how Mustang Bio's 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. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While Mustang Bio shareholders are down 52% for the year, the market itself is up 6.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 11% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Mustang Bio by clicking this link.
Mustang Bio is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.