Lexington Biosciences, Inc. (CNSX:LNB) shareholders will doubtless be very grateful to see the share price up 50% in the last month. But that doesn't change the fact that the returns over the last year have been stomach churning. To wit, the stock has dropped 91% over the last year. So it's not that amazing to see a bit of a bounce. Only time will tell if the company can sustain the turnaround.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
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With zero revenue generated over twelve months, we don't think that Lexington Biosciences has proved its business plan yet. You have to wonder why venture capitalists aren't funding it. 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 Lexington Biosciences will significantly advance the business plan 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. 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 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 Lexington Biosciences investors might realise.
Our data indicates that Lexington Biosciences had CA$575,199 more in total liabilities than it had cash, when it last reported in December 2018. That puts it in the highest risk category, according to our analysis. But since the share price has dived -91% in the last year, it looks like some investors think it's time to abandon ship, so to speak. The image below shows how Lexington Biosciences's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Given that the market gained 2.1% in the last year, Lexington Biosciences shareholders might be miffed that they lost 91%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 63%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Before spending more time on Lexington Biosciences it might be wise to click here to see if insiders have been buying or selling shares.
We will like Lexington Biosciences better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.