It certainly might concern Paradigm Biopharmaceuticals Limited (ASX:PAR) shareholders to see the share price down 51% in just 30 days. But that doesn't change the fact that the returns over the last three years have been spectacular. In fact, the share price has taken off in that time, up 351%. Arguably, the recent fall is to be expected after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.
View our latest analysis for Paradigm Biopharmaceuticals
With just AU$3,781,731 worth of revenue in twelve months, we don't think the market considers Paradigm Biopharmaceuticals to have proven its business plan. 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 Paradigm Biopharmaceuticals has the funding to invent a new product before too long.
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. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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. Of course, if you time it right, high risk investments like this can really pay off, as Paradigm Biopharmaceuticals investors might know.
When it last reported its balance sheet in December 2019, Paradigm Biopharmaceuticals could boast a strong position, with cash in excess of all liabilities of AU$72m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And given that the share price has shot up 54% per year, over 3 years , its fair to say investors are liking management's vision for the future. You can see in the image below, how Paradigm Biopharmaceuticals's cash levels have changed over time (click to see the values). You can click on the image below to see (in greater detail) how Paradigm Biopharmaceuticals's cash levels have changed over time.
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. Given that situation, many of the best investors like to check if insiders have been buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. 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)?
Investors should note that there's a difference between Paradigm Biopharmaceuticals's total shareholder return (TSR) and its share price change, which we've covered above. 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 Paradigm Biopharmaceuticals's TSR, at 362% is higher than its share price return of 351%. 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 Paradigm Biopharmaceuticals shareholders have gained 33% (in total) over the last year. The TSR has been even better over three years, coming in at 67% per year. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for Paradigm Biopharmaceuticals you should know about.
Paradigm Biopharmaceuticals 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.
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.
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. Thank you for reading.
"exciting" - Google News
March 13, 2020 at 09:00AM
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Announcing: Paradigm Biopharmaceuticals (ASX:PAR) Stock Soared An Exciting 351% In The Last Three Years - Yahoo Finance
"exciting" - Google News
https://ift.tt/2GLT7hy
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