If EPS Growth Is Important To You, Alumasc Group (LON:ALU) Presents An Opportunity

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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Alumasc Group (LON:ALU). 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.

Check out our latest analysis for Alumasc Group

Alumasc Group's Improving Profits

Alumasc Group 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. So it would be better to isolate the growth rate over the last year for our analysis. Alumasc Group's EPS shot up from UK£0.21 to UK£0.27; a result that's bound to keep shareholders happy. That's a commendable gain of 27%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Despite the relatively flat revenue figures, shareholders will be pleased to see EBIT margins have grown from 12% to 15% in the last 12 months. That's something to smile about.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Alumasc Group's future profits.

Are Alumasc Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We note that Alumasc Group insiders spent UK£70k on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the CEO & Executive Director, G. Hooper, who made the biggest single acquisition, paying UK£33k for shares at about UK£2.25 each.

The good news, alongside the insider buying, for Alumasc Group bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at UK£12m. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 23% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Alumasc Group Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Alumasc Group's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. Astute investors will want to keep this stock on watch. However, before you get too excited we've discovered 4 warning signs for Alumasc Group (2 shouldn't be ignored!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Alumasc Group, 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.