Is Alliance Developpement Capital SIIC's (EPA:ALDV) Share Price Gain Of 148% Well Earned?

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Alliance Developpement Capital SIIC (EPA:ALDV) which saw its share price drive 148% higher over five years. It's also good to see the share price up 60% over the last quarter.

View 5 warning signs we detected for Alliance Developpement Capital SIIC

Alliance Developpement Capital SIIC recorded just €511,000 in revenue over the last twelve months, which isn't really enough for us to consider it to have a proven product. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that Alliance Developpement Capital SIIC will significantly advance the business plan before too long.

Companies that lack both meaningful revenue and profits are usually considered high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Of course, if you time it right, high risk investments like this can really pay off, as Alliance Developpement Capital SIIC investors might know.

Our data indicates that Alliance Developpement Capital SIIC had €20m more in total liabilities than it had cash, when it last reported in June 2019. That puts it in the highest risk category, according to our analysis. So we're surprised to see the stock up 85% per year, over 5 years , but we're happy for holders. Investors must really like its potential. You can click on the image below to see (in greater detail) how Alliance Developpement Capital SIIC's cash levels have changed over time. The image below shows how Alliance Developpement Capital SIIC's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. However you can take a look at whether insiders have been buying up shares. It's usually a positive if they have, as it may indicate they see value in the stock. Luckily we are in a position to provide you with this free chart of insider buying (and selling).

A Different Perspective

It's good to see that Alliance Developpement Capital SIIC has rewarded shareholders with a total shareholder return of 49% in the last twelve months. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Alliance Developpement Capital SIIC better, we need to consider many other factors. For example, we've discovered 5 warning signs for Alliance Developpement Capital SIIC (of which 3 are major) which any shareholder or potential investor should be aware of.

We will like Alliance Developpement Capital SIIC better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR exchanges.

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.

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. Thank you for reading.