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The Pharmacolog i Uppsala AB (publ) (STO:PHLOG B) share price has had a bad week, falling 10%. On the other hand, over the last twelve months the stock has delivered rather impressive returns. We're very pleased to report the share price shot up 112% in that time. So it is important to view the recent reduction in price through that lense. The real question is whether the business is trending in the right direction.
With just kr1,277,532 worth of revenue in twelve months, we don't think the market considers Pharmacolog i Uppsala to have proven its business plan. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Pharmacolog i Uppsala will significantly advance the business plan before too long.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. 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. Of course, if you time it right, high risk investments like this can really pay off, as Pharmacolog i Uppsala investors might know.
Pharmacolog i Uppsala had cash in excess of all liabilities of just kr5.8m when it last reported (March 2019). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. It's a testament to the popularity of the business plan that the share price gained 112% in the last year, despite the weak balance sheet. The image below shows how Pharmacolog i Uppsala's 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, many of the best investors like to check if insiders have been buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. 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 Pharmacolog i Uppsala'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. Pharmacolog i Uppsala hasn't been paying dividends, but its TSR of 129% exceeds its share price return of 112%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We're pleased to report that Pharmacolog i Uppsala rewarded shareholders with a total shareholder return of 129% over the last year. That gain actually surpasses the 18% TSR it generated (per year) over three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. You could get a better understanding of Pharmacolog i Uppsala's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE 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.