The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the OncoCyte Corporation (NYSEMKT:OCX) share price has soared 106% in the last year. Most would be very happy with that, especially in just one year! It's up an even more impressive 143% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Zooming out, the stock is actually down 15% in the last three years.
With zero revenue generated over twelve months, we don't think that OncoCyte has proved its business plan yet. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that OncoCyte comes up with a great new treatment, before it runs out of money.
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 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 OncoCyte investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital
When it reported in December 2018 OncoCyte had minimal net cash consider its expenditure: just US$2.4m 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. It's a testament to the popularity of the business plan that the share price gained 106% in the last year, despite the weak balance sheet. You can see in the image below, how OncoCyte's cash and debt levels have changed over time (click to see the values).
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. If they are buying a significant amount of shares, that's certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
Pleasingly, OncoCyte's total shareholder return last year was 106%. What is absolutely clear is that is far preferable to the dismal 5.2% average annual loss suffered over the last three years. It could well be that the business has turned around -- or else regained the confidence of investors. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
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 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.