The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Alterity Therapeutics Limited (ASX:ATH) share price had more than doubled in just one year - up 260%. Shareholders are also celebrating an even better 500% rise, over the last three months. 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 AU$48m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Alterity Therapeutics

With just AU$4,019,285 worth of revenue in twelve months, we don't think the market considers Alterity Therapeutics to have proven its business plan. 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. For example, they may be hoping that Alterity Therapeutics comes up with a great new product, before it runs out of money.

We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that the company needed to issue more shares recently so that it could raise enough money to continue pursuing its business plan. 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). Of course, if you time it right, high risk investments like this can really pay off, as Alterity Therapeutics investors might know.

When it last reported, Alterity Therapeutics had minimal cash in excess of all liabilities. So it's prudent that the management team has already moved to replenish reserves through the recent capital raising event. Given the current cash position, investors must really like its potential for the share price to be up 64% in the last year. You can click on the image below to see (in greater detail) how Alterity Therapeutics' cash levels have changed over time.

Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. 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 Alterity Therapeutics shareholders have received a total shareholder return of 260% over the last year. That certainly beats the loss of about 1.0% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Alterity Therapeutics better, we need to consider many other factors. For example, we've discovered 6 warning signs for Alterity Therapeutics (3 are a bit concerning!) that you should be aware of before investing here.

Of course Alterity Therapeutics 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 Australian 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.