With EPS Growth And More, Alto Ingredients (NASDAQ:ALTO) Makes An Interesting Case

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Alto Ingredients (NASDAQ:ALTO), 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 Alto Ingredients with the means to add long-term value to shareholders.

Check out our latest analysis for Alto Ingredients

Alto Ingredients' Improving Profits

In the last three years Alto Ingredients' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Alto Ingredients' EPS catapulted from US$0.21 to US$0.50, over the last year. Year on year growth of 134% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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. On the revenue front, Alto Ingredients has done well over the past year, growing revenue by 61% to US$1.3b but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Alto Ingredients?

Are Alto Ingredients Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

While Alto Ingredients insiders did net US$375k selling stock over the last year, they invested US$587k, a much higher figure. This overall confidence in the company at current the valuation signals their optimism. It is also worth noting that it was Independent Director Gilbert Nathan who made the biggest single purchase, worth US$139k, paying US$5.73 per share.

On top of the insider buying, it's good to see that Alto Ingredients insiders have a valuable investment in the business. Indeed, they hold US$16m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 4.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Mike Kandris is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Alto Ingredients with market caps between US$200m and US$800m is about US$2.9m.

Alto Ingredients offered total compensation worth US$1.9m to its CEO in the year to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Alto Ingredients To Your Watchlist?

Alto Ingredients' earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Alto Ingredients deserves timely attention. Before you take the next step you should know about the 3 warning signs for Alto Ingredients (1 makes us a bit uncomfortable!) that we have uncovered.

Keen growth investors love to see insider buying. Thankfully, Alto Ingredients isn't the only one. You can see a a free list of them here.

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.