These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. To wit, the Digital Wine Ventures Limited (ASX:DW8) share price is 42% higher than it was a year ago, much better than the market return of around 5.2% (not including dividends) in the same period. That's a solid performance by our standards! Digital Wine Ventures hasn't been listed for long, so it's still not clear if it is a long term winner.

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See our latest analysis for Digital Wine Ventures

With just AU$274,386 worth of revenue in twelve months, we don't think the market considers Digital Wine Ventures 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. Investors will be hoping that Digital Wine Ventures can make progress and gain better traction for the business, before it runs low on cash.

We think companies that have neither significant revenues nor profits are pretty high risk. 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).

Digital Wine Ventures had cash in excess of all liabilities of just AU$560k when it last reported (December 2018). 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 42% in the last year. The image below shows how Digital Wine Ventures's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

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. If they are buying a significant amount of shares, that's certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

Digital Wine Ventures boasts a total shareholder return of 42% for the last year. And the share price momentum remains respectable, with a gain of 70% in the last three months. This suggests the company is continuing to win over new investors. Before spending more time on Digital Wine Ventures it might be wise to click here to see if insiders have been buying or selling shares.

For those who like to find winning investments this free list of growing 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 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.