For us, stock picking is in large part the hunt for the truly magnificent stocks. But when you hold the right stock for the right time period, the rewards can be truly huge. One such superstar is Viking Therapeutics, Inc. (NASDAQ:VKTX), which saw its share price soar 462% in three years. On top of that, the share price is up 15% in about a quarter. But this could be related to the strong market, which is up 20% in the last three months.
Viking Therapeutics hasn’t yet reported any revenue yet, so it’s as much a business idea as an actual business. So it seems that the investors more focused on would could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Viking Therapeutics has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Of course, if you time it right, high risk investments like this can really pay off, as Viking Therapeutics investors might know.
When it last reported its balance sheet in December 2018, Viking Therapeutics could boast a strong position, with net cash of US$297m. This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And given that the share price has shot up 78% per year, over 3 years, its fair to say investors are liking management’s vision for the future. You can see in the image below, how Viking Therapeutics’s cash and debt 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. However you can take a look at whether insiders have been buying up shares. It’s usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.
A Different Perspective
It’s nice to see that Viking Therapeutics shareholders have gained 81% (in total) over the last year. That’s better than the annualized TSR of 78% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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