These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Audio Pixels Holdings Limited (ASX:AKP) share price is up 42% in the last year, clearly besting than the market return of around 6.0% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 33% lower than it was three years ago.
With just AU$59,859 worth of revenue in twelve months, we don't think the market considers Audio Pixels Holdings to have proven its business plan. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Audio Pixels Holdings will significantly advance the business plan 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. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing.
Audio Pixels Holdings had cash in excess of all liabilities of AU$6.6m when it last reported (June 2019). 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 42% in the last year, its fair to say investors remain excited about the future, despite the potential need for cash. The image below shows how Audio Pixels Holdings's balance sheet has changed over time; if you want to see the precise values, simply click on the image. You can see in the image below, how Audio Pixels Holdings'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. However you can take a look at whether insiders have been buying up shares. It's often positive if so, assuming the buying is sustained and meaningful. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
It's nice to see that Audio Pixels Holdings shareholders have received a total shareholder return of 42% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 2.8% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. You could get a better understanding of Audio Pixels Holdings's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.