Some PCI Biotech Holding ASA (OB:PCIB) shareholders are probably rather concerned to see the share price fall 57% over the last three months. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 142% higher today. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now.
With just kr9,372,000 worth of revenue in twelve months, we don't think the market considers PCI Biotech Holding to have proven its business plan. 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 PCI Biotech Holding 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. PCI Biotech Holding has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
PCI Biotech Holding had cash in excess of all liabilities of kr234m when it last reported (December 2019). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price up 86% per year, over 5 years , the market is seems hopeful about the potential, despite the cash burn. You can see in the image below, how PCI Biotech Holding's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between PCI Biotech Holding's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. PCI Biotech Holding hasn't been paying dividends, but its TSR of 248% exceeds its share price return of 142%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's good to see that PCI Biotech Holding has rewarded shareholders with a total shareholder return of 20% in the last twelve months. However, that falls short of the 28% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand PCI Biotech Holding better, we need to consider many other factors. For example, we've discovered 5 warning signs for PCI Biotech Holding (2 are a bit unpleasant!) that you should be aware of before investing here.
Of course PCI Biotech Holding 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 NO exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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