Those Who Purchased ImmuPharma (LON:IMM) Shares Five Years Ago Have A 72% Loss To Show For It
It is doubtless a positive to see that the ImmuPharma plc (LON:IMM) share price has gained some 50% in the last three months. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. In fact, the share price has tumbled down a mountain to land 72% lower after that period. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.
Check out our latest analysis for ImmuPharma
With just UK£19,626 worth of revenue in twelve months, we don't think the market considers ImmuPharma 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). It seems likely some shareholders believe that ImmuPharma 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. ImmuPharma has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in June 2019 ImmuPharma had minimal cash in excess of all liabilities consider its expenditure: just UK£1.7m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 23% per year, over 5 years . The image below shows how ImmuPharma's balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how ImmuPharma'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
It's good to see that ImmuPharma has rewarded shareholders with a total shareholder return of 43% in the last twelve months. That certainly beats the loss of about 23% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. For example, we've discovered 6 warning signs for ImmuPharma (2 make us uncomfortable!) that you should be aware of before investing here.
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 GB exchanges.
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.
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