vTv Therapeutics (NASDAQ:VTVT) investors are sitting on a loss of 88% if they invested five years ago
Long term investing is the way to go, but that doesn't mean you should hold every stock forever. It hits us in the gut when we see fellow investors suffer a loss. Spare a thought for those who held vTv Therapeutics Inc. (NASDAQ:VTVT) for five whole years - as the share price tanked 88%. Even worse, it's down 14% in about a month, which isn't fun at all. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for vTv Therapeutics
vTv Therapeutics recorded just US$2,018,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that vTv 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. 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. It certainly is a dangerous place to invest, as vTv Therapeutics investors might realise.
vTv Therapeutics had liabilities exceeding cash by US$13m when it last reported in September 2022, according to our data. That makes it extremely high risk, in our view. But with the share price diving 13% per year, over 5 years , it's probably fair to say that some shareholders no longer believe the company will succeed. You can see in the image below, how vTv Therapeutics' cash levels have changed over time (click to see the values).
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'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
It's good to see that vTv Therapeutics has rewarded shareholders with a total shareholder return of 12% in the last twelve months. Notably the five-year annualised TSR loss of 13% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - vTv Therapeutics has 6 warning signs (and 2 which shouldn't be ignored) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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