As any investor knows, you don’t hit a home run every time you swing. But it’s not unreasonable to try to avoid truly shocking capital losses. So spare a thought for the long-term shareholders of Inovio Pharmaceuticals, Inc. (NASDAQ: INO); the share price has fallen 83% in the last twelve months. It would be a stark reminder of the importance of diversification. Even if you look at three years, the returns are still disappointing, with the stock price dropping 44% over that time. Moreover, it fell by 61% in about a quarter. It’s not much fun for the holders. We really hope that anyone weathering this price drop has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.
Given that Inovio Pharmaceuticals has lost $39 million in value over the past 7 days, let’s see if the longer-term decline was driven by the company’s economics.
Check out our latest analysis for Inovio Pharmaceuticals
With just $1,602,712 in revenue in twelve months, we don’t think the market sees Inovio Pharmaceuticals as a proven business plan. You must be wondering why venture capitalists aren’t funding it. It therefore seems that shareholders are too busy dreaming about future progress rather than dwelling on the current (lack of) income. For example, they may be hoping that Inovio Pharmaceuticals will come up with a great new product, before it runs out of money.
We believe that companies that do not have significant revenues or profits are quite high risk. There’s almost always a chance they’ll need to raise more capital, and their progress – and share price – will dictate how dilutive that is for current holders. While some of these companies continue to generate revenue, profit, and drive value, others are fired upon by hopeful naive people before eventually going bankrupt. Some Inovio Pharmaceuticals investors have already tasted the bitterness that stocks like this can leave in their mouths.
Inovio Pharmaceuticals had cash above all liabilities of $270 million when last reported (March 2022). That’s not too bad, but management may have to think about raising capital or going into debt, unless the company is close to breaking even. We would say shareholders are concerned about the need for more capital, as the stock price has fallen 83% over the past year. The image below shows how Inovio Pharmaceuticals’ balance sheet has evolved over time; if you want to see the exact values, just click on the picture.
Of course, the truth is that it’s hard to value companies without a lot of revenue or profit. Given this situation, would you be concerned if it turned out that insiders were relentlessly selling stocks? It would bother me, that’s for sure. It only takes a moment to check if we have recently identified any insider selling.
A different perspective
We regret to report that Inovio Pharmaceuticals shareholders are down 83% for the year. Unfortunately, this is worse than the general market decline of 21%. That said, it is inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may point to unresolved challenges, given that it was worse than the 13% annualized loss over the past half-decade. Generally speaking, long-term stock price weakness can be a bad sign, although contrarian investors may want to seek out the stock in hopes of a turnaround. While it is worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Consider the risks, for example. Every business has them, and we’ve spotted 4 warning signs for Inovio Pharmaceuticals you should know.
If you like buying stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.