Some Dyadic International, Inc. (NASDAQ:DYAI) shareholders are probably rather concerned to see the share price fall 38% over the last three months. On the bright side the share price is up over the last half decade. However we are not very impressed because the share price is only up 62%, less than the market return of 82%.
Since the stock has added US$6.2m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Dyadic International recorded just US$2,591,738 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. 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 Dyadic International comes up with a great new product, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered 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 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). Some Dyadic International investors have already had a taste of the sweet taste stocks like this can leave in the mouth, as they gain popularity and attract speculative capital.
Dyadic International had cash in excess of all liabilities of US$13m when it last reported (March 2022). While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price up 118% per year, over 5 years , the market is seems hopeful about the potential, despite the cash burn. You can see in the image below, how Dyadic International's cash levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. However you can take a look at whether insiders have been buying up shares. It's usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
We regret to report that Dyadic International shareholders are down 38% for the year. Unfortunately, that's worse than the broader market decline of 8.9%. 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 10%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Dyadic International , and understanding them should be part of your investment process.
Dyadic International is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.