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Volatility 101: Should Allscripts Healthcare Solutions (NASDAQ:MDRX) Shares Have Dropped 19%?

Simply Wall St

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX), since the last five years saw the share price fall 19%. The silver lining is that the stock is up 4.3% in about a week.

See our latest analysis for Allscripts Healthcare Solutions

Allscripts Healthcare Solutions 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 it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over five years, Allscripts Healthcare Solutions grew its revenue at 5.3% per year. That's far from impressive given all the money it is losing. Given the weak growth, the share price fall of 4.0% isn't particularly surprising. Investors should consider how bad the losses are, and whether the company can make it to profitability with ease. Shareholders will want the company to approach profitability if it can't grow revenue any faster.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

NasdaqGS:MDRX Income Statement, October 18th 2019

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Allscripts Healthcare Solutions stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Allscripts Healthcare Solutions shareholders are down 18% for the year, but the market itself is up 9.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4.0% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. 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 Allscripts Healthcare Solutions by clicking this link.

Allscripts Healthcare Solutions 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 US 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.