Here's Why I Think Alpha FX Group (LON:AFX) Might Deserve Your Attention Today

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Alpha FX Group (LON:AFX), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Alpha FX Group

Alpha FX Group's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. Impressively, Alpha FX Group has grown EPS by 34% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. The good news is that Alpha FX Group is growing revenues, and EBIT margins improved by 42.9 percentage points to 43%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Alpha FX Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Any way you look at it Alpha FX Group shareholders can gain quiet confidence from the fact that insiders shelled out UK£260k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Chairman Clive Kahn for UK£139k worth of shares, at about UK£17.50 per share.

Along with the insider buying, another encouraging sign for Alpha FX Group is that insiders, as a group, have a considerable shareholding. Indeed, they have a glittering mountain of wealth invested in it, currently valued at UK£216m. Coming in at 23% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Morgan Tillbrook is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like Alpha FX Group with market caps between UK£766m and UK£2.5b is about UK£1.2m.

The CEO of Alpha FX Group only received UK£363k in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Alpha FX Group Worth Keeping An Eye On?

You can't deny that Alpha FX Group has grown its earnings per share at a very impressive rate. That's attractive. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. Even so, be aware that Alpha FX Group is showing 2 warning signs in our investment analysis , you should know about...

The good news is that Alpha FX Group is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.