MannKind Corp. (NASDAQ:MNKD) has been a frustrating stock for long-term investors to own. Despite the intriguing potential of the company's Technosphere technology, investors who purchased at the IPO have seen the share price steadily drift downward. Since going public in July 2004, the stock has lost a sickening 70% of its value even as the S&P 500 climbed over 90%.

SPY Chart

To make matters worse, early investors' holdings have been diluted significantly over that time period, as the company has raised additional capital through common stock offerings to fund its research and development efforts.

MNKD Shares Outstanding Chart

Since 2012 alone the company's outstanding share count has more than tripled! Hopefully, such extreme dilution should be a thing of the past now that MannKind's first product, an inhaled insulin called Afrezza, is on the market.

Recently, however, the stock price has fallen under $5 after MannKind's marketing partner Sanofi (NASDAQ:SNY) announced just 1 million euros (about $1.1 million) in Afrezza sales during its first quarter on the market -- a much slower adoption than anticipated. MannKind's management noted one roadblock seems to be that before initiating treatment patients must undergo a lung function test conducted using a spirometer, a device that only about 30% of endocrinologists (i.e. doctors who specialize in treating diabetes) have in their office. MannKind is reportedly is working with Sanofi to make access to this test easier in an effort to drive adoption.

It can be tempting for investors to look at MannKind's small share price and think of it as a buying opportunity, as they incorrectly correlate that small price with a stock being "cheap." I know this thinking firsthand, as when I started investing I made the mistake of putting money into many different "cheap" stocks that were trading under $5. My logic was that it is much easier for a stock to double if it is its trading for a low dollar amount.

If you are attracted to MannKind's stock only because of its low share price, you may find some value in remembering this Warren Buffet quote: "Price is what you pay. Value is what you get."

This advice can be easy to apply to many purchases that you make over the course your life. Consider the last time you bought a car. Did you simply look for the cheapest sticker price on the lot? Probably not. Instead, you mentally weighed the cost of the car against a variety of variables that you used to determine the car's value like MPG, number of seats, overall condition, and how well it fit your driving needs.

For some reason, this logic is intuitive for most of us when we are shopping for consumer goods, but it can be difficult to apply when we are interesting in purchasing a stock.

Thankfully, a simple mental exercise exists that can help to test your actual conviction in a prospective company's value.

Imagine that MannKind's management team announced a 10-for-1 reverse stock split. If that happened, the stock price would rise by a factor of 10, and at the same time the share count would drop by a factor of 10. The company would be in the exact same position it is now in terms of revenue, market opportunity, cash balance, market cap, etc. The only difference would be the share price would be much higher and the share count much lower.

Under this fictional example, the current share price of $4.65 would become $46.50. At the same time, shares outstanding would fall from 409 million to 40.9 million.

Would you still be interesting in buying the stock?
If the answer is a resounding "no," then chances are good you are placing far too much emphasis on the share price itself and are neglecting to consider the underlying business. If this is the case, you should probably place more emphasis on value than price when making investment decisions.

The nice thing about this thought exercise is that you can also use it when a high price is scaring you off a stock as well. For example, consider another biotech company, Amgen Inc. (NASDAQ:AMGN). The stock is trading around $110, which the old, novice me would have simply dismissed as "too expensive," even though the company has a sustainable dividend. If you pretend Amgen announced a 10-for-1 stock split and the share price suddenly fell to $11 per share, would you become more interested in owning the stock? If the answer is "yes," then once again the share price is playing tricks on you, and you need to refocus on the business itself and learn to ignore the stock's dollar price in exchange for a consideration of actual value.

If you are interesting in investing in MannKind, you should focus on the opportunities that exist for Afrezza, how sales are performing, and whether Afrezza might succeed where Exubera failed. If the low share price is the only reason MannKind is attracting your attention, use this simple mental test to evaluate your conviction in the stock. It has worked wonders in making me a better investor, and it could do the same for you.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.