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Some Biotron Limited (ASX:BIT) shareholders are probably rather concerned to see the share price fall 34% over the last three months. Despite this, the stock is a strong performer over the last year, no doubt about that. Indeed, the share price is up an impressive 228% in that time. So it is important to view the recent reduction in price through that lense. More important, going forward, is how the business itself is going.
We don't think Biotron's revenue of AU$1,073,763 is enough to establish significant demand. 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 Biotron has the funding to invent a new product 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. Some Biotron investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital
When it last reported its balance sheet in December 2018, Biotron could boast a strong position, with net cash of AU$6.6m. That allows management to focus on growing the business, and not worry too much about raising capital. And given that the share price has shot up 228% in the last year, its fair to say investors are liking management's vision for the future. The image below shows how Biotron's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. 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. You can click here to see if there are insiders buying.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Biotron's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that Biotron's TSR, at 262% is higher than its share price return of 228%. 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 nice to see that Biotron shareholders have received a total shareholder return of 262% over the last year. There's no doubt those recent returns are much better than the TSR loss of 3.4% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. Before spending more time on Biotron it might be wise to click here to see if insiders have been buying or selling shares.
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 AU 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 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.