It is doubtless a positive to see that the Neurotrope, Inc. (NASDAQ:NTRP) share price has gained some 38% in the last three months. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Five years have seen the share price descend precipitously, down a full 87%. So we don't gain too much confidence from the recent recovery. The million dollar question is whether the company can justify a long term recovery.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
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Neurotrope didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that Neurotrope has the funding to invent a new product 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. 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. It certainly is a dangerous place to invest, as Neurotrope investors might realise.
Neurotrope had cash in excess of all liabilities of US$23m when it last reported (March 2019). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. We'd venture that shareholders are concerned about the need for more capital, because the share price has dropped 34% per year, over 5 years. You can see in the image below, how Neurotrope's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Investors in Neurotrope had a tough year, with a total loss of 27%, against a market gain of about 3.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 34% 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. You could get a better understanding of Neurotrope's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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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