Even though Alpha Group (SZSE:002292) has lost CN¥577m market cap in last 7 days, shareholders are still up 80% over 3 years

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, the Alpha Group (SZSE:002292) share price is up 80% in the last three years, clearly besting the market decline of around 10% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 19%.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Alpha Group

We don't think that Alpha Group's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 3 years Alpha Group saw its revenue grow at 1.7% per year. Considering the company is losing money, we think that rate of revenue growth is uninspiring. The modest growth is probably broadly reflected in the share price, which is up 22%, per year over 3 years. Ultimately, the important thing is whether the company is trending to profitability. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Alpha Group stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

We're pleased to report that Alpha Group shareholders have received a total shareholder return of 19% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. 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 Alpha Group better, we need to consider many other factors. Take risks, for example - Alpha Group has 1 warning sign we think you should be aware of.

We will like Alpha Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 Chinese exchanges.

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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.