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Is SenesTech's (NASDAQ:SNES) 236% Share Price Increase Well Justified?

Simply Wall St

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right stock, you can make a lot more than 100%. For example, the SenesTech, Inc. (NASDAQ:SNES) share price had more than doubled in just one year - up 236%. Also pleasing for shareholders was the 91% gain in the last three months. SenesTech hasn't been listed for long, so it's still not clear if it is a long term winner.

View our latest analysis for SenesTech

We don't think SenesTech's revenue of US$297,000 is enough to establish significant demand. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that SenesTech 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. The is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). SenesTech has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

SenesTech had net cash of just US$3.5m when it last reported (December 2018). So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. Given how low on cash the it got, investors must really like its potential for the share price to be up 236% in the last year. The image below shows how SenesTech's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

NasdaqCM:SNES Historical Debt, April 27th 2019
NasdaqCM:SNES Historical Debt, April 27th 2019

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 often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.

A Different Perspective

SenesTech shareholders should be happy with the total gain of 236% over the last twelve months. A substantial portion of that gain has come in the last three months, with the stock up 91% in that time. This suggests the company is continuing to win over new investors. Before spending more time on SenesTech it might be wise to click here to see if insiders have been buying or selling shares.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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 editorial-team@simplywallst.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.