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While Keros Therapeutics, Inc. (NASDAQ:KROS) shareholders are probably generally happy, the stock hasn’t had particularly good run recently, with the share price falling 14% in the last quarter. But that doesn’t change the fact that the returns over the last year have been very strong. Like an eagle, the share price soared 204% in that time. So some might not be surprised to see the price retrace some. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.

Check out our latest analysis for Keros Therapeutics

Keros Therapeutics recorded just US$2,500,000 in revenue over the last twelve months, which isn’t really enough for us to consider it to have a proven product. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Keros Therapeutics has the funding to invent a new product before too long.

As a general rule, if a company doesn’t have much revenue, and it loses money, then it is a high risk investment. 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Of course, if you time it right, high risk investments like this can really pay off, as Keros Therapeutics investors might know.

Keros Therapeutics has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$258m, when it last reported (December 2020). 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 72% in the last year , it’s fair to say investors are liking management’s vision for the future. The image below shows how Keros Therapeutics’ balance sheet has changed over time; if you want to see the precise values, simply click on the image.

debt-equity-history-analysis

In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. One thing you can do is check if company insiders are buying 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

Keros Therapeutics shareholders should be happy with the total gain of 204% over the last twelve months. Unfortunately the share price is down 14% over the last quarter. Shorter term share price moves often don’t signify much about the business itself. 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. Even so, be aware that Keros Therapeutics is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable…

Keros Therapeutics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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. 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.

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