If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the AGM Group Holdings Inc. (NASDAQ:AGMH) share price is up 17% in the last year, clearly besting the market return of around 3.7% (not including dividends). So that should have shareholders smiling. AGM Group Holdings hasn't been listed for long, so it's still not clear if it is a long term winner.
Check out our latest analysis for AGM Group Holdings
We don't think AGM Group Holdings's revenue of US$709,630 is enough to establish significant demand. 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. It seems likely some shareholders believe that AGM Group Holdings will significantly advance the business plan 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 such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized).
AGM Group Holdings had liabilities exceeding cash by US$586k when it last reported in December 2019, according to our data. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 152% in the last year , but we're happy for holders. It's clear more than a few people believe in the potential. You can see in the image below, how AGM Group Holdings's cash levels have changed over time (click to see the values).
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. However you can take a look at whether insiders have been buying up shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.
A Different Perspective
AGM Group Holdings boasts a total shareholder return of 17% for the last year. And the share price momentum remains respectable, with a gain of 33% in the last three months. This suggests the company is continuing to win over new investors. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 4 warning signs for AGM Group Holdings (2 are a bit unpleasant!) that you should be aware of before investing here.
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 US exchanges.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
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. Thank you for reading.