Want to participate in a short research study? Help shape the future of investing tools and earn a $40 gift card!
The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Alithya Group Inc. (TSE:ALYA) shareholders over the last year, as the share price declined 47%. That's well below the market decline of 7.6%. Because Alithya Group hasn't been listed for many years, the market is still learning about how the business performs. More recently, the share price has dropped a further 19% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Alithya Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, Alithya Group increased its revenue by 33%. We think that is pretty nice growth. Meanwhile, the share price is down 47% over twelve months, which is disappointing given the progress made. You might even wonder if the share price was previously over-hyped. However, that's in the past now, and it's the future that matters most.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. This free report showing analyst forecasts should help you form a view on Alithya Group
A Different Perspective
Alithya Group shareholders are down 47% for the year, even worse than the market loss of 7.6%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 19% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Alithya Group (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
Alithya Group 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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.