Anytime a company releases news about a stock split it creates waves throughout the investment community. And Tuesday, NeuroBo Pharmaceuticals Inc. (NRBO) announced that a reverse stock split is coming. While this was done more so to comply with Nasdaq’s listing requirements, the move contributed to a massive spike in the stock’s price. Just this morning shares are up over 130%. But – what does this mean for investors? Does VectorVest rate NRBO a buy, or has the window of opportunity already closed? We’ll take a look at what the system shows later on. First, some background information to set the stage for why this is happening.
Tuesday morning, the company released that the 1-for-30 reverse split of its Common Stock, par value $0.001 (“common stock”) would take place at 5 pm eastern time. We recently wrote about Tesla’s stock split and what it could mean for the company. But, this is a bit different – as NRBO is initiating a reverse stock split. This means there will be fewer shares of common stock outstanding. This will inevitably lead to an increase in the conversion and exercise prices of stock options and warrants associated with the company.
While NRBO currently has outstanding shares of around 26.7 million, this figure is expected to drop to just under 1 million shares upon initiation of the reverse stock split. This essentially means that the value of the stock will rise as a result of lower supply. Simple economics.
And when looking at the company’s performance recently, this news couldn’t have come at a better time. NeuroBo Pharmaceuticals has struggled in both the short and long term. In the past year, the company’s stock had dropped about 90% prior to this news, all the way to $0.27. But this pales in comparison to the long-term chart for NRBO. The company traded at a whopping $18.66 /share in July 2017.
But are things poised to turn around for NRBO? Is it possible they could get to where they once were? Very unlikely. However, there does appear to be a window of opportunity for investors right now. Let’s take a look at what the VectorVest stock forecasting software has to say about this situation.
NRBO Has Poor Upside & Safety – But an Incredibly Strong Price Trend
VectorVest simplifies investing by summarizing technical and fundamental analysis for any given stock into three ratings: Relative Value (RV), Relative Safety (RS), and Relative Timing (RT). These ratings sit on a scale of 0.00-2.00 – with the higher end of that range being better. 1.00 is the average in our system. And together, the overall VST Rating a stock is given dictates whether it’s awarded a buy, sell, or hold rating. So, what’s going on with NRBO?
- Very Poor Upside Potential: there’s no question that NRBO stock has skyrocketed in price. But, this is purely the result of the reverse stock split and investor sentiment. The long-term price appreciation potential for this stock is horrid with an RT rating of 0.34. Moreover, Vectorvest calculates the stock’s true value to be closer to $8/share.
- Poor Safety: the RS indicator speaks to the risk that a stock has. It’s calculated from an analysis of a stock’s financial performance, debt-to-equity ratio, business longevity, and other risk factors. And when it comes to NRBO, the RS rating of 0.60 is poor.
- Excellent Timing: this is where things get interesting, as NRBO has maxed out the RT rating at 2.00. This figure is calculated from an in-depth analysis of the direction, dynamics, and magnitude behind a stock’s price trend. As for NRBO, the positive price trend in its sails is as strong as it gets.
While the overall VST rating of 1.30 for NRBO is very good, investors should be careful with this stock. The trend we’re seeing could be purely based on speculation and investor sentiment. As the RT rating starts to draw back towards 1.00, it will suggest the positive price trend is weakening.
So – does this mean you should buy NRBO stock right now? Or, has the potential for profits subsided by this point? To get the answer, you can analyze NRBO stock free here. You won’t want to miss this one…
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for NRBO, it has very poor upside potential with poor safety. But, the positive price trend is as strong as it gets.
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