Stock Analysis

Is Now The Time To Put Alpha and Omega Semiconductor (NASDAQ:AOSL) On Your Watchlist?

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NasdaqGS:AOSL
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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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 Alpha and Omega Semiconductor (NASDAQ:AOSL). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Alpha and Omega Semiconductor

How Fast Is Alpha and Omega Semiconductor Growing Its Earnings Per Share?

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Alpha and Omega Semiconductor grew its EPS from US$0.079 to US$2.73, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Alpha and Omega Semiconductor is growing revenues, and EBIT margins improved by 11.8 percentage points to 11%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NasdaqGS:AOSL Earnings and Revenue History November 15th 2021

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Alpha and Omega Semiconductor's forecast profits?

Are Alpha and Omega Semiconductor Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Alpha and Omega Semiconductor insiders have a significant amount of capital invested in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$233m. That equates to 19% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Should You Add Alpha and Omega Semiconductor To Your Watchlist?

Alpha and Omega Semiconductor's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Alpha and Omega Semiconductor for a spot on your watchlist. Still, you should learn about the 2 warning signs we've spotted with Alpha and Omega Semiconductor .

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.

Valuation is complex, but we're helping make it simple.

Find out whether Alpha and Omega Semiconductor is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NasdaqGS:AOSL

Alpha and Omega Semiconductor

Alpha and Omega Semiconductor Limited designs, develops, and supplies power semiconductor products for computing, consumer electronics, communication, and industrial applications in Hong Kong, China, South Korea, the United States, and internationally.

Excellent balance sheet with solid track record.