Did You Manage To Avoid Suda Pharmaceuticals’s (ASX:SUD) 97% Share Price Wipe Out? Simply Wall St November 22, 2019 Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Suda Pharmaceuticals Ltd (ASX:SUD) during the five years that saw its share price drop a whopping 97%. And some of the more recent buyers are probably worried, too, with the stock falling 71% in the last year. Shareholders have had an even rougher run lately, with the share price down 50% in the last 90 days.We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.See our latest analysis for Suda Pharmaceuticals With just AU$1,250,778 worth of revenue in twelve months, we don’t think the market considers Suda Pharmaceuticals to have proven its business plan. We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? As a result, we think it’s unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that Suda Pharmaceuticals will significantly advance the business plan 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. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Suda Pharmaceuticals has already given some investors a taste of the bitter losses that high risk investing can cause.When it reported in June 2019 Suda Pharmaceuticals had minimal cash in excess of all liabilities consider its expenditure: just AU$2.0m 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 50% per year, over 5 years . The image below shows how Suda Pharmaceuticals’s balance sheet has changed over time; if you want to see the precise values, simply click on the image. The image below shows how Suda Pharmaceuticals’s balance sheet has changed over time. ASX:SUD Historical Debt, November 22nd 2019 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’d like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.A Different Perspective While the broader market gained around 24% in the last year, Suda Pharmaceuticals shareholders lost 70%. 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 48% over the last half decade. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. If you would like to research Suda Pharmaceuticals in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.If you spot an error that warrants correction, please contact the editor at [email protected]. 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.
SUD Price at posting:
0.2¢ Sentiment: Sell Disclosure: Not Held
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