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Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the NeuroScientific Biopharmaceuticals Limited (ASX:NSB) share price is 16% higher than it was a year ago, much better than the market decline of around 15% (not including dividends) in the same period. That's a solid performance by our standards! We'll need to follow NeuroScientific Biopharmaceuticals for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
View our latest analysis for NeuroScientific Biopharmaceuticals
We don't think NeuroScientific Biopharmaceuticals's revenue of AU$33,849 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 NeuroScientific 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. 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.
When it last reported its balance sheet in December 2019, NeuroScientific Biopharmaceuticals had cash in excess of all liabilities of AU$4.1m. 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. Given the share price has increased by a solid 153% in the last year , it's fair to say investors remain excited about the future, despite the potential need for cash. You can see in the image below, how NeuroScientific Biopharmaceuticals's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying 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).
A Different Perspective
NeuroScientific Biopharmaceuticals boasts a total shareholder return of 16% for the last year. A substantial portion of that gain has come in the last three months, with the stock up 12% in that time. This suggests the company is continuing to win over new investors. 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 for instance, the ever-present spectre of investment risk. We've identified 6 warning signs with NeuroScientific Biopharmaceuticals (at least 4 which are potentially serious) , and understanding them should be part of your investment process.