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The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) share price is 16% higher than it was a year ago, much better than the market return of around 9.4% (not including dividends) in the same period. That’s a solid performance by our standards! We’ll need to follow Rocket Pharmaceuticals for a while to get a better sense of its share price trend, since it hasn’t been listed for particularly long.
Rocket Pharmaceuticals hasn’t yet reported any revenue yet, so it’s as much a business idea as an actual business. 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 Rocket Pharmaceuticals has the funding to invent a new product before too long.
As a general rule, if a company doesn’t have much revenue, and it loses money, then it is a high risk investment. There 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).
When it last reported its balance sheet in December 2018, Rocket Pharmaceuticals had net cash of US$148m. That’s not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. Given the share price has increased by a solid 16% in the last year, its fair to say investors remain excited about the future, despite the potential need for cash. You can see in the image below, how Rocket Pharmaceuticals’s cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. 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
It’s nice to see that Rocket Pharmaceuticals shareholders have gained 16% over the last year. And the share price momentum remains respectable, with a gain of 42% in the last three months. This suggests the company is continuing to win over new investors. Before spending more time on Rocket Pharmaceuticals it might be wise to click here to see if insiders have been buying or selling shares.
Of course Rocket Pharmaceuticals may not be the best stock to buy. So you may wish to see this free collection of growth stocks.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.