With EPS Growth And More, Alpa Laboratories (NSE:ALPA) Is Interesting

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 Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Alpa Laboratories (NSE:ALPA). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Alpa Laboratories

Alpa Laboratories's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Alpa Laboratories has managed to grow EPS by 29% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Alpa Laboratories's EBIT margins have actually improved by 7.0 percentage points in the last year, to reach 8.5%, but, on the flip side, revenue was down 7.9%. That falls short of ideal.

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 capitalization of ₹749m. That makes it extra important to check on its balance sheet strength.

Are Alpa Laboratories Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Alpa Laboratories insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 61%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. Of course, Alpa Laboratories is a very small company, with a market cap of only ₹749m. That means insiders only have ₹456m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Alpa Laboratories Deserve A Spot On Your Watchlist?

You can't deny that Alpa Laboratories has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Even so, be aware that Alpa Laboratories is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

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