It is doubtless a positive to see that the Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) share price has gained some 102% in the last three months. But that isn't much consolation to those who have suffered through the declines of the last year. Specifically, the stock price slipped by 58% in that time. It's not that amazing to see a bounce after a drop like that. It may be that the fall was an overreaction.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Infinity Pharmaceuticals recorded just US$2,217,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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). For example, they may be hoping that Infinity Pharmaceuticals comes up with a great new product, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. 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. It certainly is a dangerous place to invest, as Infinity Pharmaceuticals investors might realise.
Our data indicates that Infinity Pharmaceuticals had US$6.4m more in total liabilities than it had cash, when it last reported in June 2022. That makes it extremely high risk, in our view. But with the share price diving 58% in the last year , it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Infinity Pharmaceuticals' cash levels have changed over time.
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? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
While the broader market lost about 14% in the twelve months, Infinity Pharmaceuticals shareholders did even worse, losing 58%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Infinity Pharmaceuticals has 5 warning signs (and 3 which are concerning) we think you should know about.
But note: Infinity Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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