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What Type Of Returns Would Athersys'(NASDAQ:ATHX) Shareholders Have Earned If They Purchased Their Shares ...

For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investm

For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Athersys, Inc. (NASDAQ:ATHX), since the last five years saw the share price fall 26%. Unfortunately the share price momentum is still quite negative, with prices down 26% in thirty days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Check out our latest analysis for Athersys

Athersys recorded just US$1,440,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. 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 Athersys 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 usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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 reported in December 2020 Athersys had minimal cash in excess of all liabilities consider its expenditure: just US$23m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. With that in mind, you can understand why the share price dropped 5% per year, over 5 years. You can see in the image below, how Athersys' cash levels have changed over time (click to see the values).

debt-equity-history-analysis
NasdaqCM:ATHX Debt to Equity History March 27th 2021

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. What if insiders are ditching the stock hand over fist? 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.

A Different Perspective

Investors in Athersys had a tough year, with a total loss of 15%, against a market gain of about 68%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Athersys is showing 5 warning signs in our investment analysis , and 1 of those is potentially serious...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. *Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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