Denali Therapeutics Inc. (NASDAQ:DNLI) shareholders will doubtless be very grateful to see the share price up 31% in the last quarter. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 53% in that period. Some might say the recent bounce is to be expected after such a bad drop. Perhaps the company has turned over a new leaf.

While the last three years has been tough for Denali Therapeutics shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Denali Therapeutics

With just US$1,267,000 worth of revenue in twelve months, we don't think the market considers Denali Therapeutics to have proven its business plan. You have to wonder why venture capitalists aren't funding it. 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 Denali Therapeutics comes up with a great new product, before it runs out of money.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Denali Therapeutics has already given some investors a taste of the bitter losses that high risk investing can cause.

Denali Therapeutics had cash in excess of all liabilities of US$781m when it last reported (June 2024). 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 down 15% per year, over 3 years , it seems likely that the need for cash is weighing on investors' minds. You can see in the image below, how Denali Therapeutics' cash levels have changed over time (click to see the values).

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? It would bother me, that's for sure. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

Denali Therapeutics provided a TSR of 8.8% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 7% over half a decade It is possible that returns will improve along with the business fundamentals. 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. Even so, be aware that Denali Therapeutics is showing 4 warning signs in our investment analysis , you should know about...