Alio Gold Inc. (TSE:ALO) shareholders should be happy to see the share price up 29% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Indeed, the share price is down a whopping 92% in that time. So we don't gain too much confidence from the recent recovery. The real question is whether the business can leave its past behind and improve itself over the years ahead.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Because Alio Gold made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade Alio Gold reduced its trailing twelve month revenue by 6.3% for each year. That's not what investors generally want to see. The share price fall of 40% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. Fear of becoming a 'bagholder' may be keeping people away from this stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Alio Gold shareholders are down 10% for the year, but the market itself is up 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 40% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 4 warning signs for Alio Gold you should be aware of.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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