Here's Why We Think Alpa Laboratories (NSE:ALPA) Might Deserve Your Attention Today

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Alpa Laboratories (NSE:ALPA), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Alpa Laboratories with the means to add long-term value to shareholders.

See our latest analysis for Alpa Laboratories

How Fast Is Alpa Laboratories Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Alpa Laboratories has grown EPS by 47% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Our analysis has highlighted that Alpa Laboratories' revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. Alpa Laboratories maintained stable EBIT margins over the last year, all while growing revenue 12% to ₹1.1b. That's encouraging news for the company!

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.

Alpa Laboratories isn't a huge company, given its market capitalisation of ₹2.3b. That makes it extra important to check on its balance sheet strength.

Are Alpa Laboratories Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Alpa Laboratories will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 62% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about ₹1.4b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Does Alpa Laboratories Deserve A Spot On Your Watchlist?

Alpa Laboratories' earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Alpa Laboratories for a spot on your watchlist. Even so, be aware that Alpa Laboratories is showing 1 warning sign in our investment analysis , you should know about...

Although Alpa Laboratories certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.