Yahoo Finance If EPS Growth Is Important To You, Alphamin Resources (CVE:AFM) Presents An Opportunity
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Alphamin Resources (CVE:AFM), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for Alphamin Resources
Alphamin Resources' Improving Profits
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that Alphamin Resources' EPS went from US$0.0032 to US$0.087 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of Alphamin Resources shareholders is that EBIT margins have grown from 33% to 57% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Alphamin Resources Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
The good news for Alphamin Resources shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Independent Director Brendon Jones bought US$52k worth of shares at an average price of around US$0.64. It seems that at least one insider is prepared to show the market there is potential within Alphamin Resources.
It's commendable to see that insiders have been buying shares in Alphamin Resources, but there is more evidence of shareholder friendly management. Namely, Alphamin Resources has a very reasonable level of CEO pay. The median total compensation for CEOs of companies similar in size to Alphamin Resources, with market caps between US$200m and US$800m, is around US$1.2m.
The Alphamin Resources CEO received US$635k in compensation for the year ending December 2021. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Alphamin Resources To Your Watchlist?
Alphamin Resources' earnings have taken off in quite an impressive fashion. Better yet, we can observe insider buying and the chief executive pay looks reasonable. The strong EPS growth suggests Alphamin Resources may be at an inflection point. If these have piqued your interest, then this stock surely warrants a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Alphamin Resources , and understanding these should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Alphamin Resources, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
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