American Resources' (NASDAQ:AREC) Wonderful 491% Share Price Increase Shows How Capitalism Can Build Wealth

For many, the main point of investing in the stock market is to achieve spectacular returns. When you find (and hold) a big winner, you can markedly improve your finances. For example, the American Resources Corporation (NASDAQ:AREC) share price rocketed moonwards 491% in just one year. On top of that, the share price is up 136% in about a quarter. American Resources hasn't been listed for long, so it's still not clear if it is a long term winner.

See our latest analysis for American Resources

Because American Resources made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year American Resources saw its revenue shrink by 72%. This is in stark contrast to the splendorous stock price, which has rocketed 491% since this time a year ago. It's pretty clear the market isn't basing its valuation on fundamental metrics like revenue. While this gain looks like speculative buying to us, sometimes speculation pays off.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for American Resources in this interactive graph of future profit estimates.

A Different Perspective

It's nice to see that American Resources shareholders have gained 491% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 136% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. It's always interesting to track share price performance over the longer term. But to understand American Resources better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for American Resources you should be aware of, and 1 of them makes us a bit uncomfortable.

We will like American Resources better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.

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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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