Is Now The Time To Put Alpa Laboratories (NSE:ALPA) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Alpa Laboratories (NSE:ALPA), which has not only revenues, but also profits. 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 Alpa Laboratories

Alpa Laboratories' Improving Profits

Alpa Laboratories 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. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Alpa Laboratories' EPS grew from ₹3.44 to ₹6.70, over the previous 12 months. It's a rarity to see 94% year-on-year growth like that.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Alpa Laboratories achieved similar EBIT margins to last year, revenue grew by a solid 15% to ₹1.1b. That's progress.

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.

Alpa Laboratories isn't a huge company, given its market capitalisation of ₹1.2b. That makes it extra important to check on its balance sheet strength.

Are Alpa Laboratories Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Alpa Laboratories insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 64%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Of course, Alpa Laboratories is a very small company, with a market cap of only ₹1.2b. So despite a large proportional holding, insiders only have ₹794m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Is Alpa Laboratories Worth Keeping An Eye On?

Alpa Laboratories' earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Alpa Laboratories is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Alpa Laboratories is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

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.