The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Alithya Group Inc. (TSE:ALYA) have tasted that bitter downside in the last year, as the share price dropped 33%. That's disappointing when you consider the market returned 9.1%. Alithya Group may have better days ahead, of course; we've only looked at a one year period. The good news is that the stock is up 4.7% in the last week.
Alithya Group isn't a profitable company, so 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. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last year Alithya Group saw its revenue grow by 49%. That's well above most other pre-profit companies. The share price drop of 33% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our brains have evolved to think in linear fashion, so there's value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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. If you are thinking of buying or selling Alithya Group stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
While Alithya Group shareholders are down 33% for the year, the market itself is up 9.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 1.9%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Alithya Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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 firstname.lastname@example.org. 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.