Is Now The Time To Put Alpha FX Group (LON:AFX) On Your Watchlist?

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 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.

In contrast to all that, many investors prefer to focus on companies like Alpha FX Group (LON:AFX), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Alpha FX Group

How Fast Is Alpha FX Group 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) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Alpha FX Group has managed to grow EPS by 34% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. EBIT margins for Alpha FX Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 68% to UK£77m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Are Alpha FX Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Even though some insiders sold down their holdings, their actions speak louder than words with UK£240k more invested than sold by people who know they company best. An optimistic sign for those with Alpha FX Group in their watchlist. It is also worth noting that it was Independent Non-Executive Chairman Clive Kahn who made the biggest single purchase, worth UK£139k, paying UK£17.50 per share.

On top of the insider buying, it's good to see that Alpha FX Group insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at UK£177m. That equates to 23% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Alpha FX Group's CEO, Morgan Tillbrook, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between UK£329m and UK£1.3b, like Alpha FX Group, the median CEO pay is around UK£1.1m.

The Alpha FX Group CEO received UK£694k in compensation for the year ending December 2021. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

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. Furthermore, company insiders have been adding to their significant stake in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Alpha FX Group you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Alpha FX Group isn't the only one. You can see a a free list of them here.

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.