Ovid Therapeutics (NASDAQ:OVID) shareholders have endured a 77% loss from investing in the stock five years ago
We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Anyone who held Ovid Therapeutics Inc. (NASDAQ:OVID) for five years would be nursing their metaphorical wounds since the share price dropped 77% in that time. And some of the more recent buyers are probably worried, too, with the stock falling 55% in the last year. More recently, the share price has dropped a further 24% in a month.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for Ovid Therapeutics
We don't think Ovid Therapeutics' revenue of US$1,445,366 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? 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 Ovid Therapeutics 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 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 Ovid Therapeutics investors might realise.
Ovid Therapeutics had cash in excess of all liabilities of US$127m when it last reported (June 2022). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. We'd venture that shareholders are concerned about the need for more capital, because the share price has dropped 12% per year, over 5 years. The image below shows how Ovid Therapeutics' balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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? 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 Ovid Therapeutics shareholders are down 55% for the year. Unfortunately, that's worse than the broader market decline of 25%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. 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 example, we've discovered 3 warning signs for Ovid Therapeutics that you should be aware of before investing here.
Of course Ovid Therapeutics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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