It might be of some concern to shareholders to see the Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) share price down 17% in the last month. But that doesn't change the reality that over twelve months the stock has done really well. Looking at the full year, the company has easily bested an index fund by gaining 40%.
We don't think Syndax Pharmaceuticals's revenue of US$1,517,000 is enough to establish significant demand. 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 Syndax Pharmaceuticals comes up with a great new product, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing.
When it reported in September 2019 Syndax Pharmaceuticals had minimal cash in excess of all liabilities consider its expenditure: just US$41m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. Given how low on cash the it got, investors must really like its potential for the share price to be up 132% in the last year . You can click on the image below to see (in greater detail) how Syndax Pharmaceuticals's cash levels have changed over time. The image below shows how Syndax Pharmaceuticals'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. However you can take a look at whether insiders have been buying up 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
It's nice to see that Syndax Pharmaceuticals shareholders have gained 40% (in total) over the last year. So this year's TSR was actually better than the three-year TSR (annualized) of 1.3%. The improving returns to shareholders suggests the stock is becoming more popular with time. 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. For example, we've discovered 3 warning signs for Syndax Pharmaceuticals that you should be aware of before investing here.
Syndax Pharmaceuticals 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.
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