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Further weakness as Century Therapeutics (NASDAQ:IPSC) drops 13% this week, taking one-year losses to 71%

It's not a secret that every investor will make bad investments, from time to time. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn't blame Century Therapeutics, Inc. (NASDAQ:IPSC) shareholders if they were still in shock after the stock dropped like a lead balloon, down 71% in just one year. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Century Therapeutics hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 31% in the last 90 days. But this could be related to the weak market, which is down 18% in the same period.

If the past week is anything to go by, investor sentiment for Century Therapeutics isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Century Therapeutics

We don't think Century Therapeutics' revenue of US$1,058,000 is enough to establish significant demand. 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 Century Therapeutics has the funding to invent a new product 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. 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). It certainly is a dangerous place to invest, as Century Therapeutics investors might realise.

Century Therapeutics has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$197m, when it last reported (March 2022). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 71% in the last year , it seems like the market might have been over-excited previously. The image below shows how Century Therapeutics' balance sheet has changed over time; if you want to see the precise values, simply click on the image.

debt-equity-history-analysis
debt-equity-history-analysis

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. What if insiders are ditching the stock hand over fist? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.

A Different Perspective

We doubt Century Therapeutics shareholders are happy with the loss of 71% over twelve months. That falls short of the market, which lost 21%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 31%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Century Therapeutics better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Century Therapeutics (of which 1 is significant!) you should know about.

But note: Century Therapeutics 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.