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Is Now The Time To Put Amphastar Pharmaceuticals (NASDAQ:AMPH) On Your Watchlist?

Simply Wall St
·4 min read

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Amphastar Pharmaceuticals (NASDAQ:AMPH). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.

See our latest analysis for Amphastar Pharmaceuticals

Amphastar Pharmaceuticals's Improving Profits

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Amphastar Pharmaceuticals grew its EPS from US$0.061 to US$1.11, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.

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 Amphastar Pharmaceuticals is growing revenues, and EBIT margins improved by 3.9 percentage points to 3.2%, over the last year. That's great to see, on both counts.

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.

NasdaqGS:AMPH Income Statement May 9th 2020
NasdaqGS:AMPH Income Statement May 9th 2020

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 Amphastar Pharmaceuticals.

Are Amphastar Pharmaceuticals Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Amphastar Pharmaceuticals insiders have a significant amount of capital invested in the stock. With a whopping US$77m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 8.9% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Does Amphastar Pharmaceuticals Deserve A Spot On Your Watchlist?

Amphastar Pharmaceuticals's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Amphastar Pharmaceuticals is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Amphastar Pharmaceuticals , and understanding them should be part of your investment process.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.