Investing in the stock market can often feel like you’re playing Russian roulette, especially these days. It’s hard to know what to invest in and what to leave alone. When a company gets your attention and you feel like it might be a good long-term investment option, there is a great deal of research that must be done in order to determine whether or not that is actually the case. With regard to one such company known as Onconova Therapeutics, there are many factors at play. Disseminating those different factors will help you figure out whether or not this stock is a good option for you or if you would be better off with something else.
Who Is Onconova Therapeutics?
If you’re not already familiar with the company, the first thing you have to learn is what they’re all about. This particular company was founded in 1998 and as you might have guessed, they are a biological research company. That much is fairly obvious from the name alone. What might not be so obvious is that they focus virtually all of their research on finding new and innovative ways to treat and prevent cancer. There are a lot of biological research companies that focus on similar things, so if you’re going to consider investing in their stock as a long-term option, you have to figure out what sets them apart from the competition. The thing that truly makes them stand out is the type of research that they’re doing. They’re not looking at more traditional options such as finding new takes on the same types of medications that have been used for years. Instead, they’re looking at research based on the cellular level as a means of using that type of medicine to disrupt the cancer cells at the cellular level. The thought process is that if successful, they’ll be able to treat various types of cancer and essentially eradicate it from that particular individual as if it had never occurred in the first place. Obviously, this is one of the more interesting prospects to come along in some time with regard to cancer research. There’s a great deal riding on this company being successful. If they can figure it out, it could theoretically be possible that cancer could become nothing more serious than the common cold. That said, they’ve been in business since 1998 and they haven’t quite cracked the code just yet. Aside from the importance of their medical research with regard to saving lives, you have to figure out what all of that means from a financial point of view. Fortunately, you’ve come to the right place because all of that will be further discussed in the following paragraphs.
The Stock at a Glance
If you look at the current price of their stock (traded as ONTX), you will see that it’s available for next to nothing. As a matter of fact, you can currently purchase a share of Onconova Therapeutics stock for just $1.82. That might seem like they’re practically giving it away, but it’s actually up by 3.46% over the last 24 hours of trading. If you decide to look at things for the last 52 weeks, you’ll see that this stock has been selling for as much as $16.50 and as little as $1.38. Even at $16.50, you would think that the stock would be something of a bargain, but you have to answer a more important question here. Why is the stock fluctuating so much? More importantly, why is it so incredibly close to its 52-week low right now? You can’t possibly decide whether or not this is a good long-term investment until you can adequately answer all of these questions and more. That means finding out exactly why the stock is currently performing as it is. As is typically the case, that involves looking deeper into things in order to see exactly what is really going on.
Potential Issues With Cash Flow
One of the reasons that this particular stock has fluctuated so much over the course of the last year is because of the way the company has been spending money. As a matter of fact, they’ve spent so much money in the last 52 weeks that they have worried a lot of their investors about whether or not they’re going to spend more money than they actually have in reserve, effectively putting themselves out of business. At the moment, the company doesn’t owe any outstanding debts. That’s obviously a positive thing. The thing that is scaring some investors off is the fact that in one year, they spent approximately $21 million. That sounds like an enormous amount of money, but you also have to consider the type of work that they’re doing. Performing cancer research at the cellular level isn’t exactly cheap. As such, it’s going to cost a significant amount of money in order for them to continue their research, especially if they’re trying to make any type of significant headway. It’s important to remember that the company has been in business for several years, so they know what they need to do in order to keep themselves afloat. At the moment, they have enough cash to last for another two and a half years, even if they don’t raise a single dime between now and then. That should be enough to overcome fears of most investors. Once you get through this part of the question, the next question becomes a matter of understanding what they need to do to raise additional revenue and how complicated that process actually is.
One thing that you have to understand is that the company only started gaining revenue from their operations over the course of the past year. The revenue that they gained was not a significant amount, at only $227,000. That said, last year marked the first time that they had gained any revenue from operations whatsoever. That means that this number should start increasing as time goes on. You also have to consider whether or not it’s possible for the company to raise revenue and if so, how much could potentially be raised within a reasonable amount of time. Basically, there are two different ways that the company could theoretically raise cash. One involves selling additional shares of stock. This is something that company executives are not terribly keen on doing because it would only serve to further dilute the value of the stock that is already out there. Since it’s gone from a 52 week high of more than $16 per share to close to its low of just over $1 per share, it’s not realistic to sell additional shares in order to raise more money. In fact, they’ve already scared off some investors because of their fluctuating stock prices. Since that’s not a particularly good option for them, the only other way to raise additional revenue quickly is to take on more debt. Granted, the company could potentially do this, but only if it’s relatively certain that it’s going to make enough revenue in the coming years to pay that debt off, with interest. That’s an option that might be possible, but it also doesn’t make investors feel terribly comfortable. Before you automatically decide that this is not a company that you’re interested in investing in as a long-term option, consider the fact that they have significantly reduced the amount of cash that they burn through in a given year when compared to what they’ve been doing in the past. Obviously, the executives at the company are well aware of the fact that they have about 2.5 years worth of cash left and that they need to slow their cash burn while simultaneously increasing their revenue. It’s a problem that they’re obviously working on as opposed to merely being aware of it and doing nothing about it. While that may not make every investor feel completely safe, it definitely is a plus. At least they’re not going into things blindly, nor are they delusional about their situation by knowing what they need to do, yet continuing to do business in exactly the same manner as they always have.
Predictions from Stock Market Analysts
Of course, the only thing left to closely examine involves the predictions from various stock market analysts. You might be surprised to learn that the overwhelming majority of them believe that this particular company is one that is almost perfectly poised to make more than enough money to significantly increase the value of their stock within the next several months. Despite the fact that they do have some issues that they need to work through, they seem to be in a good position to start making a great deal of money overall. Obviously, this is something that is going to increase the value of their stock exponentially. The fact that the company is taking proactive steps to increase their revenue while simultaneously reducing their cash burn is enough to get the attention of a lot of stock market analysts. While not every analyst agrees, a lot of them do believe that this particular company is on the precipice of something big with regard to their financial situation. At the moment, they have enough money to keep them going for a respectable amount of time so that they have the opportunity to develop the revenue that they need in order to continue on in the long-term. Of course, they are a research company and that means that there is always a chance that they could be on the precipice of discovering some type of major breakthrough with regard to the medical research they’re doing. If that is the case, then investors would no doubt be in for a major treat with regard to the amount of money they could potentially make from selling their shares of stock. If that doesn’t happen, then the situation could be quite different. If that’s the case, then you have to look at the way that the company is operated as a standalone type of situation without factoring anything else in. If they don’t make a big medical breakthrough, will they be able to survive in the long term? Even if they do survive, will their stock increase or will it end up being worth next to nothing?
Arguing for the Other Side
As previously mentioned, not every stock market analyst is ready to sing the praises of this particular company. In fact, some of them don’t think that this company is being terribly responsible with the revenue that they do have, nor do they believe that they are raising enough revenue to keep themselves afloat in the long-term. As such, they think that the company is overvalued and that the stock will eventually tank. If that ends up happening, there would be no point in purchasing shares to invest in as a long-term option because you’re not going to make any money from the process regardless of what you do. Perhaps the more difficult question becomes one of trying to decide which stock market analysts are correct. As is so often the case with questions about the stock market, everything is not black and white. There are definitely a lot of gray areas that have to be worked through and deciding whether or not to invest in this stock as a long-term option involves trying to answer questions that there may not be clear answers to. Unless you have a specific desire to invest in this company because you believe in the research they are doing or something similar, it’s far more likely that you can find other companies to invest in that have a better chance of producing more money for you as a long-term investment option. That doesn’t necessarily mean that this particular company should not be on your radar, nor does it mean that you should avoid investing in it at all costs. However, it does mean that the chances of you making a significant amount of money on it as a result of a long-term investment are not high enough to warrant investing in at this particular point in time, at least not for most investors. Obviously, you have to make your own decisions, but there are plenty of options out there that are likely to perform better.