While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. When you buy and hold the right company, the returns can make a huge difference to both you and your family. For example, the Axsome Therapeutics, Inc. (NASDAQ:AXSM) share price is up a whopping 410% in the last year, a handsome return in a single year. Shareholders are also celebrating an even better 505% rise, over the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. And shareholders have also done well over the long term, with an increase of 60% in the last three years.
Axsome Therapeutics didn’t have any revenue in the last year, so it’s fair to say it doesn’t yet have a proven product (or at least not one people are paying for). 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 Axsome Therapeutics will significantly advance the business plan before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. The is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. 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). Axsome Therapeutics has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Axsome Therapeutics had net debt of US$472,616 when it last reported in December 2018, 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 410% in the last year, but we’re happy for holders. It’s clear more than a few people believe in the potential. The image below shows how Axsome Therapeutics’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
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. One thing you can do is check if company insiders are buying shares. It’s often positive if so, assuming the buying is sustained and meaningful. You can click here to see if there are insiders buying.
A Different Perspective
Pleasingly, Axsome Therapeutics’s total shareholder return last year was 410%. That gain actually surpasses the 17% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.