KRYS

We rate Krystal Biotech, Inc. (KRYS) as a Hold with a composite score of 58.7/100 at a current price of $264.82. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (77th percentile) and stability (71th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (36th percentile) and value (63th percentile) tempers our overall conviction. We assign a Narrow Moat rating (48/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is widening, which provides additional comfort in the durability of the competitive position.

Krystal Biotech, Inc. holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 58.7/100 places it at rank #817 in our full 7,333-stock universe. At $5.1B in market capitalization, Krystal Biotech, Inc. is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 39% and momentum in the 77th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 36th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 96% (+53.5pp vs sector) narrow to operating margins of 38% (+36.5pp vs sector) and net margins of 48.5%, yielding a gross-to-net conversion rate of 51%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $264.82, Krystal Biotech, Inc. is trading near fair value based on current fundamentals. Our value factor score of 63/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 42.0x (a 89% premium to the sector median of 22.3x), EV/EBITDA of 54.5x (at a premium), P/B of 6.2x, P/S of 20.8x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to Krystal Biotech, Inc.. The company exhibits strong financial stability with a beta of 0.81, conservative leverage (9% D/E), and a stability factor in the 71th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: elevated valuation multiple (P/E 42.0x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 71th percentile and quality factor at the 65th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 96% provide a buffer against cost pressures; conservative leverage (9% D/E) limits balance sheet risk; above-average stability (71th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Krystal Biotech, Inc.'s capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by disciplined leverage (9% D/E), best-in-class net margins of 48.5%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — Krystal Biotech, Inc. approaches this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. We note that the combination of 13.5% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, Krystal Biotech, Inc. receives a Hold rating with a composite score of 58.7/100 (rank #817 of 7,333). Our quantitative framework assigns a Narrow Moat (48/100, trend: widening), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 62/100.

Our analysis supports a neutral stance on Krystal Biotech, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.