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While not a mind-blowing move, it is good to see that the CannPal Animal Therapeutics Limited (ASX:CP1) share price has gained 25% in the last three months. But that is minimal compensation for the share price under-performance over the last year. In fact the stock is down 32% in the last year, well below the market return.
We don't think CannPal Animal Therapeutics's revenue of AU$297,300 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? 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 CannPal Animal Therapeutics can make progress and gain better traction for the business, before it runs low on cash.
Companies that lack both meaningful revenue and profits are usually considered 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 such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized).
When it last reported its balance sheet in December 2018, CannPal Animal Therapeutics could boast a strong position, with cash in excess of all liabilities of AU$4.4m. That allows management to focus on growing the business, and not worry too much about raising capital. But since the share price has dropped 32% in the last year, it seems like the market might have been over-excited previously. The image below shows how CannPal Animal Therapeutics'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. Would it bother you if insiders were selling the stock? 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
While CannPal Animal Therapeutics shareholders are down 32% for the year, the market itself is up 9.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 25% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. If you would like to research CannPal Animal Therapeutics in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course CannPal Animal Therapeutics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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 email@example.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.