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Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the Active Biotech AB (publ) (STO:ACTI) share price is a whole 76% lower. That is extremely sub-optimal, to say the least. Furthermore, it's down 18% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 15% in the same period.
View our latest analysis for Active Biotech
With just kr3,425,000 worth of revenue in twelve months, we don't think the market considers Active Biotech to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Active Biotech 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. 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 go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Active Biotech has already given some investors a taste of the bitter losses that high risk investing can cause.
When it reported in March 2020 Active Biotech had minimal cash in excess of all liabilities consider its expenditure: just kr37m to be specific. So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. That probably explains why the share price is down 25% per year, over 5 years. The image below shows how Active Biotech'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. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It only takes a moment for you to check whether we have identified any insider sales recently.
What about the Total Shareholder Return (TSR)?
We've already covered Active Biotech's share price action, but we should also mention its total shareholder return (TSR). 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. Active Biotech hasn't been paying dividends, but its TSR of -67% exceeds its share price return of -76%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.