Valued at a market cap of $167 million, Alithya (TSX:ALYA) is a Canadian tech stock that is down 76% from all-time highs. The TSX stock went public in late 2018 and has grossly underperformed the broader markets over the last seven years.
Alithya Group is a Canada-based IT services and solutions provider. It offers strategic consulting, enterprise transformation, and digital enablement services across multiple sectors, including financial services, healthcare, government, and manufacturing.
These offerings span verticals such as enterprise resource planning, cloud infrastructure, cybersecurity, data analytics, and AI/machine learning solutions.
Alithya has developed proprietary platforms, including AI-FI for artificial intelligence integration, Rapid QA for automated testing, and specialized solutions for nuclear plants and healthcare.
Is the small-cap Canadian stock a good buy?
Alithya Group continues to build momentum with its second-quarter (Q2) fiscal 2026 results, driven by operational improvements. The Canadian IT services provider reported revenue of $124.3 million, an increase of 11.5% year over year. Its gross margins rose to 34.4% in fiscal Q2, up from 30.6% in the year-ago period.
Revenue originating from the U.S. grew by 34% to $63.1 million, and accounts for over 50% of total sales. This expansion stems from organic growth in enterprise transformation services and the rapid integration of the eVerge acquisition completed in May.
The company has focused on its U.S. business in recent years to provide higher-value enterprise applications and AI-driven digital transformation.
It reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $12.8 million, indicating a margin of 10.3%. In the last 12 months, its EBITDA has surpassed $50 million for the first time.
These margin improvements reflect Alithya’s successful shift up the value chain, replacing commodity services with specialized consulting that commands premium pricing.
However, Canadian revenues declined 7.4% as Alithya exited low-margin government contracts. Notably, these strategic exits enabled it to improve the bottom line. Its bookings stood at $9.9 million, with a book-to-bill ratio of 0.73, reflecting longer sales cycles.
Alithya reported a net loss of $31 million in fiscal Q2, driven by a $38 million non-cash impairment charge tied to ongoing business repositioning in Quebec and industry solutions. However, it reported an adjusted earnings of $9.5 million or $0.10 per share.
Is this TSX tech stock undervalued right now?
Analysts tracking the TSX tech stock forecast revenue to increase from $473.5 million in fiscal 2025 (ended in March) to $661 million in fiscal 2030. In this period, its free cash flow is projected to improve from $47.2 million to $70.5 million. If ALYA stock is priced at 10 times forward free cash flow, which is reasonable, it should gain more than 300% over the next three years.
During a recent analyst event, Alithya management highlighted a stark valuation discount. Alithya noted recent industry transactions average 14 times EBITDA, while ALYA stock trades well below this benchmark.
Additionally, Alithya launched a normal-course issuer bid to repurchase shares, signaling confidence that current valuations don’t reflect the business’s transformation and growth trajectory.
Given consensus price targets, the TSX tech stock trades at a 100% discount in December 2025.
