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The 31% return this week takes Actinogen Medical's (ASX:ACW) shareholders three-year gains to 512%

It hasn't been the best quarter for Actinogen Medical Limited (ASX:ACW) shareholders, since the share price has fallen 27% in that time. But over three years the performance has been really wonderful. In fact, the share price has taken off in that time, up 500%. So the recent fall doesn't do much to dampen our respect for the business. The thing to consider is whether there is still too much elation around the company's prospects.

The past week has proven to be lucrative for Actinogen Medical investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Actinogen Medical

We don't think Actinogen Medical's revenue of AU$1,934,072 is enough to establish significant demand. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Actinogen Medical comes up with a great new product, before it runs out of money.

We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Actinogen Medical has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

When it last reported its balance sheet in December 2021, Actinogen Medical could boast a strong position, with cash in excess of all liabilities of AU$21m. That allows management to focus on growing the business, and not worry too much about raising capital. And with the share price up 43% per year, over 3 years , the market is focussed on that blue sky potential. You can click on the image below to see (in greater detail) how Actinogen Medical's cash levels have changed over time.

debt-equity-history-analysis
debt-equity-history-analysis

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. However you can take a look at whether insiders have been buying up shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Actinogen Medical's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Actinogen Medical's TSR, at 512% is higher than its share price return of 500%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

It's good to see that Actinogen Medical has rewarded shareholders with a total shareholder return of 24% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 2% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Actinogen Medical better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Actinogen Medical (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

Actinogen Medical is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.