Here's Why We Think AltaGas (TSE:ALA) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 AltaGas (TSE:ALA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide AltaGas with the means to add long-term value to shareholders.

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How Fast Is AltaGas Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, AltaGas has achieved impressive annual EPS growth of 41%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Despite the relatively flat revenue figures, shareholders will be pleased to see EBIT margins have grown from 7.7% to 11% in the last 12 months. That's something to smile about.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Check out our latest analysis for AltaGas

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 AltaGas' future EPS 100% free.

Are AltaGas Insiders Aligned With All Shareholders?

Since AltaGas has a market capitalisation of CA$13b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Given insiders own a significant chunk of shares, currently valued at CA$94m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Should You Add AltaGas To Your Watchlist?

AltaGas' earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering AltaGas for a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with AltaGas (at least 2 which are concerning) , and understanding these should be part of your investment process.

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.