Canadian biotech company Sunshine Biopharma (NASDAQ:SBFM) is among the leaders in today’s rather volatile session. Currently, shares of SBFM stock are up more than 60% after the company announced what appears to be incredible earnings.
The biotech company’s revenue reportedly surged more than 2,000%. Indeed, investors saw a 20x year-over-year surge in the company’s top line in just a year’s time. That sort of revenue surge is usually indicative of some sort of key catalyst. And that is exactly the case for Sunshine.
The company’s acquisition of Nora Pharma late last year appears to have driven the majority of this revenue increase. Accordingly, with the company seeing revenues surge for its core business, Sunshine announced a share buyback program of up to $2 million.
For most companies, such an announcement would be immaterial. However, Sunshine Biopharma’s market capitalization of only $18 million means that such a buyback authorization could be very lucrative for investors over the near to medium term.
Let’s dive into these numbers and what investors should make of these results.
Is SBFM Stock a Buy Following Earnings?
Any sort of incredible year-over-year increase like this is certainly likely to drive some enthusiasm around the stock. Indeed, there’s plenty to like about this kind of a revenue surge over the span of a year.
However, the reality is that this company saw its revenue surge primarily due to an acquisition made last year. Additionally, the company is still losing money, and its share buyback program appears to be one that’s being carried out, at least in part, driven by cash derived from previous equity issuances. That’s not something that’s sustainable, nor something long-term investors may want. The company could use those funds for research and development, or other value-added activities. That may provide more long-term value.
In my view, today’s move in SBFM stock is one that’s unlikely to be sustained. This is a micro-cap stock that’s seeing impressive momentum right now. However, considering its high risk profile and near-term momentum, my concern is that any sort of profit-taking or short-seller-driven decline could result in a vicious turn. I’ll be watching this stock happily from the sidelines from here.
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On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
