Is Augmedix, Inc. (AUGX) the Best One-Dollar Stock to Buy Right Now?

We recently compiled a list of the 10 Best One-Dollar Stocks To Buy Now. In this article, we are going to take a look at where Augmedix, Inc. (NASDAQ:AUGX) stands against the other one-dollar stocks.

The upward trend in the stock market has resumed, supported by strong first-quarter and second-quarter results that have relieved investor concerns about inflation. The US economy had a very strong year in 2023. Economic activity increased steadily, job creation was high, unemployment was low, real earnings rose, and inflation declined. Furthermore, the Federal Reserve maintained high interest rates throughout this time in an attempt to control inflation. June recorded a market increase of more than 10%. The large-cap market of the 500 biggest companies has already surged over 17% so far this year as analysts look forward to reduced interest rates in the second half of 2024, along with higher earnings growth and lower inflation.

Historically, since 1928, July has been the strongest month of the year for stocks in terms of performance. The market rose by 1.7% in July. Given that the market posted gains in May and June despite notable economic uncertainty, investors remain bullish that the market can sustain its positive trend.

In a May speech to the Foreign Bankers' Association, Federal Reserve Chair Jerome Powell recognized the difficulty of bringing inflation down to the desired level. Powell stated that it could be essential to keep interest rates at their present levels for a longer period of time. Interest rates have been fluctuating between 5.25% and 5.5% since July 2023.

Amid concerns over an impending recession brought on by higher interest rates, the US labor market still remains stable. According to the Labor Department, the US economy created 175,000 new jobs in April, although this was less than the 240,000 jobs that economists had predicted. The US labor market maintains a low unemployment rate of 3.9%, while US wages have risen 3.9% YoY. Nonetheless, recession fears are maintained by the historical recession predictor, the inverted U.S. Treasury yield curve, and the New York Fed's model, which projects a 50% chance of a recession within the next 12 months.

The second quarter of 2024 saw a gain of more than 3% in the US stock market. Under the hood, tech companies continued to lead the artificial intelligence trade, which showed no signs of slowing down throughout the quarter. One striking trend in the stock market this year has been the outperformance of the biggest companies. The large-cap market of the 500 biggest companies gained 4.4% in Q2, bringing its 2024 return to more than 15%. By comparison, the small-cap market had a decline of 3.3%, resulting in a reduced 2024 return of 1.6%.

With over half of 2024 already gone, the US stock market is expected to see significant increases for the second year in a row.

According to DataTrek Research co-founder Nicholas Colas, the 2024 stock market surge is about more than just this year; it also includes the outlook for 2025 and 2026. Colas stated:

“Markets are convinced that U.S. large cap companies will see many years (not just one) of improving earnings. Earnings for 2024 only have to come through slightly better than last year, and nothing occurs on the macro side (economic growth, geopolitics) to derail further earnings growth in 2025 and 2026.”

Investor confidence is supported by historical trends and recent earnings performance. The stock market does well in election years, according to historical statistics, especially when the president is serving his first term, as is the case with Joe Biden.

Methodology:

In this article, we first used a stock screener, Finviz, to list down all stocks trading under $1.5 and above $0.85 (as of the writing of this article) with over 40% institutional ownership. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks. We have used the stock's Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested. We only considered stocks that received "buy" or "strong buy" recommendations from analysts.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)

A medical professional interacting with a touch-screen device, emphasizing the company's modern approach to patient care.

Augmedix, Inc. (NADAQ:AUGX)

Number of Hedge Fund Investors: 27                                                               

For hospitals and doctors, Augmedix (NASDAQ:AUGX) creates a platform for AI-driven medical recordkeeping. Its stock has seen volatility since going public in 2021; as of right now, it is trading at $0.93. The company provides services to the top healthcare systems in the United States using ambient AI technology.

Investors are positive about the stock because of the company's consistent financial growth brought about by the rapid advancement of AI, even in the face of losses and worries about profitability and cash flow generation. As per analysts, the company has an average price target of $4.67 and an upside potential of 367.00% from the current stock price of $1.00. Analysts have rated AUGX as a "strong buy."

Despite an adjusted EBITDA loss of $5.1 million, Augmedix reported total revenues of $13.5 million in Q1 2024, a 40% increase over the same quarter the previous year and exceeding expectations and estimates. Augmedix's revenue has gone up as an outcome of strong customer demand and the effective rollout of its latest AI-powered medical documentation solutions. The $0.12 reported quarterly EPS met analyst forecasts.

Leading the way in ambient AI medical documentation and data solutions, the business has demonstrated outstanding financial success, with yearly revenue growth. Annual revenue shot up from $22.17 million in 2021 to $30.93 million in 2022 and $44.85 million in 2023, before rising to $48.70 million in the previous 12 months.

Driven by strong AI trends in the US healthcare business and the optimization of Medical Documentation Specialists (MDS) facilities in India, AUGX hopes to exceed its $60 million - $62 million revenue projection for FY 2024. From 2024 to 2030, the healthcare AI industry is expected to increase at a 38.5% compound annual growth rate (CAGR), from its estimated $19.27 billion in 2023, per Grand View Research. Significant clients like Dignity Health and HCA Healthcare that AUGX has acquired suggest that there is room for future revenue development through cross-sells and upsells of its products.

The upcoming complete launch of Augmedix Go in March 2024 and its testing in an emergency room setting with HCA Healthcare show the product's potential for expansion and increased market share. Additionally, Augmedix's business plan stipulates that payments must be made every month under yearly agreements, showing a consistent and reliable source of funding.

Notwithstanding the potential for expansion, AUGX's high cash burn rate since 2021, may lead to potential dilution. However, elite funds are piling into this stock, with hedge fund positions increasing from 26 in Q4 2023 to 27 in Q1 2024 with a collective stake of $122.12 million, giving us a clear hint that investors are bullish on Augmentix’s stock. Jeremy Green's Redmile Group is the largest stakeholder in the company, with 16,380,327 shares worth $66.995 million.

AUGX is a great investment opportunity since it is well-positioned to benefit from the quick expansion of AI in the healthcare industry. Its strategic placement and potential for margin expansion make it a desirable option even in the face of financial difficulties. Given its bright potential in the AI healthcare space, investors need to consider AUGX.

Overall AUGX ranks 2nd on our list of the best one-dollar stocks to buy. You can visit 10 Best One-Dollar Stocks To Buy Now to see the other one-dollar stocks that are on hedge funds’ radar. While we acknowledge the potential of AUGX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AUGX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

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Disclosure: None. This article is originally published at Insider Monkey.