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We think that it’s fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. Not every pick can be a winner, but when you pick the right stock, you can win big. One such superstar is Kura Oncology, Inc. (NASDAQ:KURA), which saw its share price soar 492% in three years. On top of that, the share price is up 11% in about a quarter.
Check out our latest analysis for Kura Oncology
With zero revenue generated over twelve months, we don’t think that Kura Oncology has proved its business plan yet. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Kura Oncology has the funding to invent a new product before too long.
We think companies that have neither significant revenues nor profits are pretty 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 do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Kura Oncology has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
When it last reported its balance sheet in March 2019, Kura Oncology had cash in excess of all liabilities of US$145m. That’s not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. Given the share price has increased by a solid 81% per year, over 3 years, its fair to say investors remain excited about the future, despite the potential need for cash. You can see in the image below, how Kura Oncology’s 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. 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. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
Over the last year Kura Oncology shareholders have received a TSR of 1.2%. It’s always nice to make money but this return falls short of the market return which was about 2.7% for the year. At least the longer term returns (running at about 81% a year, are better. Even the best companies don’t see strong share price performance every year. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
But note: Kura Oncology may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.