Yahoo Finance Introducing Geron (NASDAQ:GERN), The Stock That Slid 57% In The Last Five Years
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 Geron Corporation (NASDAQ:GERN) share price is a whole 57% lower. That's an unpleasant experience for long term holders. Furthermore, it's down 11% in about a quarter. That's not much fun for holders.
Check out our latest analysis for Geron
With just US$664,000 worth of revenue in twelve months, we don't think the market considers Geron to have proven its business plan. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Geron 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 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). Geron has already given some investors a taste of the bitter losses that high risk investing can cause.
When it last reported its balance sheet in September 2019, Geron could boast a strong position, with cash in excess of all liabilities of US$127m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 15% per year, over 5 years , it seems like the market might have been over-excited previously. You can click on the image below to see (in greater detail) how Geron's cash levels have changed over time. The image below shows how Geron'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. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Geron shareholders gained a total return of 9.2% during the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 15% per year, over five years. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Geron better, we need to consider many other factors. Take risks, for example - Geron has 3 warning signs (and 1 which is concerning) we think you should know about.
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.
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.
