Is Now The Time To Put Allis ElectricLtd (TWSE:1514) On Your Watchlist?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Allis ElectricLtd (TWSE:1514), 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.

View our latest analysis for Allis ElectricLtd

How Quickly Is Allis ElectricLtd Increasing Earnings Per Share?

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 Allis ElectricLtd has managed to grow EPS by 18% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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 Allis ElectricLtd achieved similar EBIT margins to last year, revenue grew by a solid 24% to NT$8.6b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Allis ElectricLtd.

Are Allis ElectricLtd Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Allis ElectricLtd followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at NT$3.6b. This totals to 13% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Very encouraging.

Is Allis ElectricLtd Worth Keeping An Eye On?

You can't deny that Allis ElectricLtd has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. We should say that we've discovered 3 warning signs for Allis ElectricLtd (1 can't be ignored!) that you should be aware of before investing here.

Although Allis ElectricLtd certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Taiwanese companies that not only boast of strong growth but have also seen recent insider buying..

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.