It's been a soft week for Auxly Cannabis Group Inc. (TSE:XLY) shares, which are down 18%. But that doesn't change the fact that the returns over the last half decade have been spectacular. In fact, during that period, the share price climbed 864%. Impressive! Arguably, the recent fall is to be expected after such a strong rise. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 25% decline over the last twelve months. It really delights us to see such great share price performance for investors.
Since the long term performance has been good but there's been a recent pullback of 18%, let's check if the fundamentals match the share price.
Given that Auxly Cannabis Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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 5 years Auxly Cannabis Group saw its revenue grow at 79% per year. That's well above most pre-profit companies. Fortunately, the market has not missed this, and has pushed the share price up by 57% per year in that time. It's never too late to start following a top notch stock like Auxly Cannabis Group, since some long term winners go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.
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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Auxly Cannabis Group stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Auxly Cannabis Group shareholders are down 25% for the year, but the market itself is up 28%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 57%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 3 warning signs for Auxly Cannabis Group you should be aware of.
Auxly Cannabis 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.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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