Prescient Therapeutics (ASX:PTX) shareholders have earned a 31% CAGR over the last three years

Prescient Therapeutics Limited (ASX:PTX) shareholders might be concerned after seeing the share price drop 27% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. The share price marched upwards over that time, and is now 126% higher than it was. So the recent fall in the share price should be viewed in that context. The thing to consider is whether the underlying business is doing well enough to support the current price.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Prescient Therapeutics

We don't think Prescient Therapeutics' revenue of AU$1,889,336 is enough to establish significant demand. 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. For example, they may be hoping that Prescient Therapeutics 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. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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. Prescient Therapeutics has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

Prescient Therapeutics had cash in excess of all liabilities of AU$11m when it last reported (June 2022). That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. Given the share price has increased by a solid 91% per year, over 3 years , it's fair to say investors remain excited about the future, despite the potential need for cash. The image below shows how Prescient Therapeutics' balance sheet has changed over time; if you want to see the precise values, simply click on the image.

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. Given that situation, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

Prescient Therapeutics shareholders are down 43% for the year, but the market itself is up 8.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 14% per year over half a decade. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Prescient Therapeutics (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

But note: Prescient 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 AU exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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