We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. To wit, the ProQR Therapeutics N.V. (NASDAQ:PRQR) share price managed to fall 63% over five long years. That's not a lot of fun for true believers. Furthermore, it's down 15% in about a quarter. That's not much fun for holders.
We don't think ProQR Therapeutics' revenue of €1,491,000 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 ProQR Therapeutics 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. We can see that they needed to raise more capital, and took that step recently despite the fact that it would have been dilutive to current holders. While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. It certainly is a dangerous place to invest, as ProQR Therapeutics investors might realise.
When it last reported its balance sheet, ProQR Therapeutics had cash in excess of all liabilities. That's not too bad but management decided to raise capital in any case to shore up the balance sheet since the company is not yet breaking even. We'd venture that shareholders are still concerned despite the additional capital, because the share price has dropped 10% per year, over 5 years. The image below shows how ProQR 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 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 the broader market gained around 15% in the last year, ProQR Therapeutics shareholders lost 15%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 10% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with ProQR Therapeutics , and understanding them should be part of your investment process.
Of course ProQR 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.
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. 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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