Unless you borrow money to invest, the potential losses are limited. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Akso Health Group (NASDAQ:AHG) share price has soared 268% in the last 1 year. Most would be very happy with that, especially in just one year! And in the last week the share price has popped 95%. In contrast, the longer term returns are negative, since the share price is 14% lower than it was three years ago.
Since the stock has added US$89m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Akso Health Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.
Akso Health Group actually shrunk its revenue over the last year, with a reduction of 87%. So we would not have expected the share price to rise 268%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Akso Health Group's financial health with this free report on its balance sheet.
A Different Perspective
It's good to see that Akso Health Group has rewarded shareholders with a total shareholder return of 268% in the last twelve months. Notably the five-year annualised TSR loss of 13% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Akso Health Group (at least 3 which are potentially serious) , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.