If EPS Growth Is Important To You, Alpa Laboratories (NSE:ALPA) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Alpa Laboratories (NSE:ALPA). 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.

Check out 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. Over the last three years, Alpa Laboratories has grown EPS by 14% per year. That growth rate is fairly good, assuming the company can keep it up.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. To cut to the chase Alpa Laboratories' EBIT margins dropped last year, and so did its revenue. Shareholders will be hoping for a change in fortunes if they're looking for profit growth.

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.

Since Alpa Laboratories is no giant, with a market capitalisation of ₹2.1b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Alpa Laboratories Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. 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. Indeed, with a collective holding of 61%, company insiders are in control and have plenty of capital behind the venture. 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 ₹1.3b riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Alpa Laboratories To Your Watchlist?

As previously touched on, Alpa Laboratories is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You should always think about risks though. Case in point, we've spotted 2 warning signs for Alpa Laboratories you should be aware of, and 1 of them is a bit unpleasant.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IN with promising growth potential and insider confidence.

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.