Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS) shareholders should be happy to see the share price up 24% in the last month. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Indeed, the share price is down a whopping 98% in that time. The recent bounce might mean the long decline is over, but we are not confident. The fundamental business performance will ultimately determine if the turnaround can be sustained.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Sunesis Pharmaceuticals hasn't yet reported any revenue, so it's as much a business idea as an actual business. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Sunesis Pharmaceuticals has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. There 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Sunesis Pharmaceuticals investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Sunesis Pharmaceuticals had cash in excess of all liabilities of just US$2.9m when it last reported (June 2019). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 54% per year, over 5 years. You can click on the image below to see (in greater detail) how Sunesis Pharmaceuticals's cash levels have changed over time. You can click on the image below to see (in greater detail) how Sunesis Pharmaceuticals's cash levels have changed over time.
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? It would bother me, that's for sure. 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 4.1% in the last year, Sunesis Pharmaceuticals shareholders lost 51%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 54% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Before spending more time on Sunesis Pharmaceuticals it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
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