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Is Aimia's (TSE:AIM) Share Price Gain Of 138% Well Earned?

Simply Wall St

When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Aimia Inc. (TSE:AIM) share price has soared 138% return in just a single year. On top of that, the share price is up 15% in about a quarter. But this could be related to the strong market, which is up 8.3% in the last three months. Zooming out, the stock is actually down 51% in the last three years.

Check out our latest analysis for Aimia

Aimia isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last year Aimia saw its revenue shrink by 28%. So we would not have expected the share price to rise 138%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.

TSX:AIM Income Statement, April 23rd 2019

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Aimia will earn in the future (free profit forecasts)

A Dividend Lost

It's important to keep in mind that we've been talking about the share price returns, which don't include dividends, while the total shareholder return does. In some ways, TSR is a better measure of how well an investment has performed. Aimia's TSR over the last year is 284%; better than its share price return. Even though the company isn't paying dividends at the moment, it has done in the past.

A Different Perspective

It's good to see that Aimia has rewarded shareholders with a total shareholder return of 284% in the last twelve months. That certainly beats the loss of about 12% 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Aimia by clicking this link.

Aimia is not the only stock that insiders are buying. 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 CA 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.