With EPS Growth And More, Alamos Gold (TSE:AGI) Makes An Interesting Case

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.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Alamos Gold (TSE:AGI). 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.

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How Fast Is Alamos Gold Growing Its Earnings Per Share?

Alamos Gold has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Alamos Gold's EPS skyrocketed from US$0.53 to US$0.68, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 27%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Alamos Gold shareholders can take confidence from the fact that EBIT margins are up from 30% to 35%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

See our latest analysis for Alamos Gold

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Alamos Gold's future EPS 100% free.

Are Alamos Gold Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CA$17b company like Alamos Gold. But we do take comfort from the fact that they are investors in the company. To be specific, they have US$62m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 0.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations over US$8.0b, like Alamos Gold, the median CEO pay is around US$7.8m.

Alamos Gold's CEO took home a total compensation package worth US$4.3m in the year leading up to December 2023. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Alamos Gold Deserve A Spot On Your Watchlist?

You can't deny that Alamos Gold has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Alamos Gold has underlying strengths that make it worth a look at. Of course, just because Alamos Gold is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Canadian companies which have demonstrated growth backed by significant insider holdings.

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.