Investors in Invex Therapeutics (ASX:IXC) have unfortunately lost 56% over the last three years

The truth is that if you invest for long enough, you’re going to end up with some losing stocks. But the last three years have been particularly tough on longer term Invex Therapeutics Ltd (ASX:IXC) shareholders. Unfortunately, they have held through a 89% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 85% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 65% in thirty days. While a drop like that is definitely a body blow, money isn’t as important as health and happiness.

Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for Invex Therapeutics

With just AU$459,085 worth of revenue in twelve months, we don’t think the market considers Invex Therapeutics to have proven its business plan. This state of affairs suggests that venture capitalists won’t provide funds on attractive terms. 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 Invex Therapeutics will significantly advance the business plan 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 such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Invex Therapeutics has already given some investors a taste of the bitter losses that high risk investing can cause.

Invex Therapeutics has plenty of cash in the bank, with cash in excess of all liabilities sitting at AU$21m, when it last reported (June 2023). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But with the share price diving 24% per year, over 3 years , it could be that the price was previously too hyped up. The image below shows how Invex Therapeutics’ balance sheet has changed over time; if you want to see the precise values, simply click on the image.

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Of course, the truth is that it is hard to value companies without much 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. You can click here to see if there are insiders selling.

What About The Total Shareholder Return (TSR)?

Investors should note that there’s a difference between Invex Therapeutics’ total shareholder return (TSR) and its share price change, which we’ve covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Invex Therapeutics hasn’t been paying dividends, but its TSR of -56% exceeds its share price return of -89%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Invex Therapeutics shareholders are down 42% for the year, but the broader market is up 10%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 16% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to “buy when there’s blood in the streets, even if the blood is your own”, he also focusses on high quality stocks with solid prospects. It’s always interesting to track share price performance over the longer term. But to understand Invex Therapeutics better, we need to consider many other factors. Even so, be aware that Invex Therapeutics is showing 4 warning signs in our investment analysis , you should know about…

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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