Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right stock, you can make a lot more than 100%. Take, for example Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX). Its share price is already up an impressive 188% in the last twelve months. On the other hand, we note it's down 9.8% in about a month. We note that the broader market is down 4.9% in the last month, and this may have impacted Crinetics Pharmaceuticals' share price. And shareholders have also done well over the long term, with an increase of 114% in the last three years.

Since the long term performance has been good but there's been a recent pullback of 4.3%, let's check if the fundamentals match the share price.

With just US$1,385,000 worth of revenue in twelve months, we don't think the market considers Crinetics Pharmaceuticals to have proven its business plan. 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 Crinetics Pharmaceuticals has the funding to invent a new product before too long.

Companies that lack both meaningful revenue and profits are usually considered 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 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 Crinetics Pharmaceuticals investors might know.

Crinetics Pharmaceuticals has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$758m, when it last reported (June 2024). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. And with the share price up 75% in the last year , the market is focussed on that blue sky potential. You can click on the image below to see (in greater detail) how Crinetics Pharmaceuticals' cash levels have changed over time.

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. However you can take a look at whether insiders have been buying up shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

It's nice to see that Crinetics Pharmaceuticals shareholders have received a total shareholder return of 188% over the last year. That's better than the annualised return of 21% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Case in point: We've spotted 3 warning signs for Crinetics Pharmaceuticals you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.