Yahoo Finance MediciNova (NASDAQ:MNOV) investors are sitting on a loss of 89% if they invested five years ago
Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Imagine if you held MediciNova, Inc. (NASDAQ:MNOV) for half a decade as the share price tanked 89%. We also note that the stock has performed poorly over the last year, with the share price down 38%. Even worse, it's down 11% in about a month, which isn't fun at all. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
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 MediciNova
MediciNova recorded just US$1,000,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that MediciNova has the funding to invent a new product before too long.
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. MediciNova has already given some investors a taste of the bitter losses that high risk investing can cause.
MediciNova has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$47m, when it last reported (December 2023). That allows management to focus on growing the business, and not worry too much about raising capital. But with the share price diving 14% per year, over 5 years , it could be that the price was previously too hyped up. You can click on the image below to see (in greater detail) how MediciNova's cash levels have changed over time.
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. 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
Investors in MediciNova had a tough year, with a total loss of 38%, against a market gain of about 25%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 14% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand MediciNova better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with MediciNova (including 2 which shouldn't be ignored) .
Of course MediciNova may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
