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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the ExpreS2ion Biotech Holding AB (publ) (STO:EXPRS2) share price is down 36% in the last year. That contrasts poorly with the market return of 11%. ExpreS2ion Biotech Holding may have better days ahead, of course; we've only looked at a one year period. Unhappily, the share price slid 3.6% in the last week.

View our latest analysis for ExpreS2ion Biotech Holding

With just kr9,311,000 worth of revenue in twelve months, we don't think the market considers ExpreS2ion Biotech Holding to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 ExpreS2ion Biotech Holding comes up with a great new product, before it runs out of money.

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.

Our data indicates that ExpreS2ion Biotech Holding had kr2,661,000 more in total liabilities than it had cash, when it last reported in March 2019. That makes it extremely high risk, in our view. But with the share price diving 36% in the last year, it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how ExpreS2ion Biotech Holding's cash levels have changed over time.

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? 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

Given that the market gained 11% in the last year, ExpreS2ion Biotech Holding shareholders might be miffed that they lost 36%. 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. With the stock down 4.0% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before spending more time on ExpreS2ion Biotech Holding it might be wise to click here to see if insiders have been buying or selling shares.

But note: ExpreS2ion Biotech Holding may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.