Stock Analysis

Should You Be Adding Alphamin Resources (CVE:AFM) To Your Watchlist Today?

  •  Updated
TSXV:AFM
Source: Shutterstock

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Alphamin Resources (CVE:AFM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Alphamin Resources with the means to add long-term value to shareholders.

See our latest analysis for Alphamin Resources

How Fast Is Alphamin Resources Growing Its Earnings Per Share?

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. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that Alphamin Resources grew its EPS from US$0.002 to US$0.065, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

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. The good news is that Alphamin Resources is growing revenues, and EBIT margins improved by 28.1 percentage points to 55%, over the last year. 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. For finer detail, click on the image.

earnings-and-revenue-history
TSXV:AFM Earnings and Revenue History July 21st 2022

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Alphamin Resources' balance sheet strength, before getting too excited.

Are Alphamin Resources Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations between US$400m and US$1.6b, like Alphamin Resources, the median CEO pay is around US$1.7m.

Alphamin Resources' CEO took home a total compensation package of US$635k in the year prior to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. 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 good governance, more generally.

Should You Add Alphamin Resources To Your Watchlist?

Alphamin Resources' earnings per share growth have been climbing higher at an appreciable rate. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. So Alphamin Resources looks like it could be a good quality growth stock, at first glance. That's worth watching. Before you take the next step you should know about the 2 warning signs for Alphamin Resources that we have uncovered.

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 free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Alphamin Resources is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

About TSXV:AFM

Alphamin Resources

Alphamin Resources Corp., together with its subsidiaries, engages in the extraction, production, and sale of tin concentrates in the Democratic Republic of the Congo.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth1
Past Performance6
Financial Health5
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Outstanding track record with excellent balance sheet and pays a dividend.