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As every investor would know, you don't hit a homerun every time you swing. But it's not unreasonable to try to avoid truly shocking capital losses. We wouldn't blame Savara Inc. (NASDAQ:SVRA) shareholders if they were still in shock after the stock dropped like a lead balloon, down 79% in just one year. That'd be a striking reminder about the importance of diversification. Savara may have better days ahead, of course; we've only looked at a one year period. The falls have accelerated recently, with the share price down 71% in the last three months.
Savara hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. You have to wonder why venture capitalists aren't funding it. 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 Savara 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. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Savara has already given some investors a taste of the bitter losses that high risk investing can cause.
When it last reported its balance sheet in March 2019, Savara had cash in excess of all liabilities of US$59m. That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 79% in the last year, it seems likely that the need for cash is weighing on investors' minds. You can click on the image below to see (in greater detail) how Savara's cash levels have changed over time. You can click on the image below to see (in greater detail) how Savara's cash levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
While Savara shareholders are down 79% for the year, the market itself is up 7.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 71% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Savara is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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 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. Thank you for reading.