Kodak Stock Is Soaring. Here’s What’s Behind the Renaissance.

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Kodak is making a foray into generic-drug ingredients Daniel Acker/Bloomberg

Eastman Kodak shares are enjoying a renaissance. Shares were up 160% early Wednesday morning, building on Tuesday’s incredible 200%-plus gain. That gain was just a prelude. By midday, Kodak shares were up more than 340%. Fresh capital and a new business are the reasons for the eye-popping rise. The question for investors now is how high can shares go?

It isn’t an easy question to answer. There are no analysts covering the company and no target prices to help investors. What’s more, the company is taking a government loan to build a drug-ingredient business. Kodak (ticker: KODK), has been and is in the imaging business. Valuing a huge new business is hard for any investor evaluating a company.

Kodak stock traded at above $17 in 2015 in its return from bankruptcy protection, trading at about 0.4 times sales. The company is trading for more than 1 times sales now, at more than $38 a share, adding in the new debt the government is providing. The old highs have already been eclipsed.

Shares actually hit $56 at one point Wednesday. Incredible.

Is that too high? Kodak’s new business is generic-drug ingredients. Generic-drug makers trade for roughly 1.5 times sales. Of course, Kodak doesn’t have the business yet. And when it does, all of its sales won’t be drug related.

Generic-drug makers take about $1 in assets to generate 40 cents in sales. Based on that, Kodak’s fresh $765 million loan could bring, perhaps $300 to $400 million in sales. That would be worth, in theory, about $450 to $600 million in market value.

That’s a finger-in-the-air approximation. And investors need to add in coming debt when valuing the entire enterprise. There is just no great way to know where the stock can go this early in its transformation.

The move does makes some sense. The loan, in one sense, more than doubles the size of the company overnight.

Kodak was the most-popular stock on Robintrack on Tuesday, a website that tracks changes in Robinhood stock-trading accounts. More than 25,000 accounts added positions. General Electric (GE) was the second most-popular stock, with about 9,600 new positions initiated.

More buying than selling is the technical reason any stock rises. The amount of buying helps explain how much a stock is rising. GE has a market capitalization of more than $60 billion. Its shares rose 2.6% Tuesday, in part, on higher interest from individual traders. Kodak is a micro-cap stock worth less than $350 million as of Tuesday’s closing price. It doesn’t take a lot to get shares moving.

Kodak stock is now up more than 700% year to date, hardly even comparable to returns of the S&P 500 and Dow Jones Industrial Average. What gains will look like from here is anyone’s guess. Investors, however, should prepare for volatility.

Early Wednesday, trading in Kodak shares was halted because of volatility but resumed after about 5 minutes. It was just a chance for investors to catch their breath.

Write to Al Root at allen.root@dowjones.com