Yahoo Finance The three-year returns have been massive for Cassava Sciences (NASDAQ:SAVA) shareholders despite underlying losses increasing
While Cassava Sciences, Inc. (NASDAQ:SAVA) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 22% in the last quarter. But over the last three years the stock has shone bright like a diamond. The longer term view reveals that the share price is up 441% in that period. As long term investors the recent fall doesn't detract all that much from the longer term story. 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 Cassava Sciences investors, so let's see if fundamentals drove the company's three-year performance.
See our latest analysis for Cassava Sciences
With zero revenue generated over twelve months, we don't think that Cassava Sciences has proved its business plan yet. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Cassava Sciences can make progress and gain better traction for the business, before it runs low on cash.
We think companies that have neither significant revenues nor profits are pretty high risk. 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. Cassava Sciences has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Cassava Sciences had cash in excess of all liabilities of US$194m when it last reported (December 2022). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price up 47% per year, over 3 years , the market is seems hopeful about the potential, despite the cash burn. The image below shows how Cassava Sciences' 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, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.
A Different Perspective
We regret to report that Cassava Sciences shareholders are down 25% for the year. Unfortunately, that's worse than the broader market decline of 6.1%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 29% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Cassava Sciences better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for Cassava Sciences you should be aware of, and 2 of them are a bit unpleasant.
Cassava Sciences is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.
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