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Did Business Growth Power 4DS Memory's (ASX:4DS) Share Price Gain of 252%?

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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. To wit, the 4DS Memory Limited (ASX:4DS) share price has flown 252% in the last three years. How nice for those who held the stock! On top of that, the share price is up 10% in about a quarter. But this could be related to the strong market, which is up 9.6% in the last three months.

Check out our latest analysis for 4DS Memory

We don't think 4DS Memory's revenue of AU$27,049 is enough to establish significant demand. 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 4DS Memory will significantly advance the business plan before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. 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. 4DS Memory has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.

When it reported in December 2018 4DS Memory had minimal net cash consider its expenditure: just AU$4.1m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. Given how low on cash the it got, investors must really like its potential for the share price to be up 52% per year, over 3 years. You can see in the image below, how 4DS Memory's cash and debt levels have changed over time (click to see the values).

ASX:4DS Historical Debt, April 6th 2019
ASX:4DS Historical Debt, April 6th 2019

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. 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. You can click here to see if there are insiders buying.

A Different Perspective

We're pleased to report that 4DS Memory rewarded shareholders with a total shareholder return of 23% over the last year. But the three year TSR of 52% per year is even better. Before spending more time on 4DS Memory it might be wise to click here to see if insiders have been buying or selling shares.

But note: 4DS Memory may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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 editorial-team@simplywallst.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.

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