It looks like RC365 Holding (LSE: RCGH) shares have given us the boom-and-bust story of 2023, so far.

The share price skyrocketed starting in June. But it’s been heading down again in August. Still, at the time of writing, RC365 is on a huge gain this year.

Buy, or not?

Is the latest fall a chance to get in on a missed opportunity?

First, I’d forget that puffed-up piece from a few months back that was promoting RC365 as the next mega-artificial intelligence (AI) stock.

No, if there’s no analysis or justification, stuff like that is just hot air. I mean, what next, Bitcoin reaching $100,000?

Cash or debt?

For a small growth stock, the first thing I’d want to see is liquidity. It’s where so many come unstuck.

For the year to March, RC365 posted a 109% rise in revenue, to HK$16.9m (£1.6m). But the firm saw a loss before tax of HK$5.4m.

On the balance sheet, net cash at 31 March stood at HK$9.5m. But the board said that was up to about HK$20m by July this year.

So there’s some liquidity, but £2m isn’t a lot. This is a company moving fairly small amounts of cash.

Attractive business

Next is the business itself. RC365 does payment gateways, IT support, security services and other stuff like that, serving the Hong Kong market.

But that’s not what the excitement is all about. No, it’s a couple of possible deals that could bring the company into the realms of AI.

The stories have been linked to Nvidia, the US tech stock that’s seen a 570% price rise in the past five years.

AI plans?

So far though, all RC365 seems to have is a couple of unclear plans. One is a memorandum of understanding with Hong Kong-listed Hatcher Group over the “possible implementation of AI solutions and other intelligent prediction algorithm models“.

And there’s a new August development with US-based YouneeqAI Technical Services over the rights to use “AI-driven cookieless personalisation” technology in the UK.

So, right now, there are hints of suggestions of possibilities of something to do with AI. But there’s very little flesh on the bones.

Valuation

I could still be tempted if the valuation is attractive. Some folks will ignore valuation when it comes to tech growth stocks, which I think is a mistake.

But I just don’t think I’m seeing good value here. There’s no profit from which to work out a price-to-earnings (P/E) ratio. And without the cash to pay dividends, there’s no yield.

The closest measure I can see is the stock’s price-to-sales (P/S) ratio. But based on the the 22 August close price, and 2023 revenues, that’s about 70 — even after RC365 shares lost 70% of their peak value.

That P/S is way higher than Nvidia’s.

Bottom line

These are three of the key things I look for in a potential growth stock buy. I might be missing the opportunity of a lifetime here, but this stock fails on all of them, for me.

Still, maybe RC365 shares will keep falling. Eyes peeled.

The post 3 things that could make me buy RC365 shares right now appeared first on The Motley Fool UK.

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More reading

• RC365 share price crashes: it may have further to go! Here’s what the charts say
• AI: Should I buy RC365 shares instead of Nvidia shares? What do the charts say?
• Beware the RC365 share price bubble
• Is RC365 stock really linked to the artificial intelligence (AI) revolution?
• Will RC365 shares push higher still? Here’s what the charts say

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.