4D Molecular Therapeutics' (NASDAQ:FDMT) growing losses don't faze investors as the stock grows 7.2% this past week

4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) shareholders might be concerned after seeing the share price drop 14% in the last month. But that doesn't detract from the splendid returns of the last year. We're very pleased to report the share price shot up 139% in that time. So it may be that the share price is simply cooling off after a strong rise. More important, going forward, is how the business itself is going.

Since the stock has added US$56m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for 4D Molecular Therapeutics

With just US$2,208,000 worth of revenue in twelve months, we don't think the market considers 4D Molecular Therapeutics to have proven its business plan. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. For example, they may be hoping that 4D Molecular Therapeutics comes up with a great new product, before it runs out of money.

We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). 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 4D Molecular Therapeutics investors might know.

4D Molecular Therapeutics had cash in excess of all liabilities of US$175m when it last reported (March 2023). 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 87% in the last year , it's fair to say investors remain excited about the future, despite the potential need for cash. The image below shows how 4D Molecular Therapeutics' balance sheet has changed over time; if you want to see the precise values, simply click on the image.

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. It's often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.

A Different Perspective

4D Molecular Therapeutics shareholders should be happy with the total gain of 139% over the last twelve months. The more recent returns haven't been as impressive as the longer term returns, coming in at just 17%. Having said that, we doubt shareholders would be concerned. It seems the market is simply waiting on more information, because if the business delivers so will the share price (eventually). I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 5 warning signs we've spotted with 4D Molecular Therapeutics (including 1 which is potentially serious) .

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.