We Ran A Stock Scan For Earnings Growth And Alfa Financial Software Holdings (LON:ALFA) Passed With Ease
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Alfa Financial Software Holdings (LON:ALFA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Alfa Financial Software Holdings
How Fast Is Alfa Financial Software Holdings Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Alfa Financial Software Holdings has grown EPS by 23% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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 Alfa Financial Software Holdings achieved similar EBIT margins to last year, revenue grew by a solid 19% to UK£102m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
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 Alfa Financial Software Holdings.
Are Alfa Financial Software Holdings Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
First and foremost; there we saw no insiders sell Alfa Financial Software Holdings shares in the last year. Even better, though, is that the Senior Independent Non-Executive Director, Christopher Sullivan, bought a whopping UK£245k worth of shares, paying about UK£1.55 per share, on average. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.
It's commendable to see that insiders have been buying shares in Alfa Financial Software Holdings, but there is more evidence of shareholder friendly management. Namely, Alfa Financial Software Holdings has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like Alfa Financial Software Holdings with market caps between UK£315m and UK£1.3b is about UK£1.1m.
Alfa Financial Software Holdings' CEO only received compensation totalling UK£27k in the year to December 2022. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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 good governance, more generally.
Does Alfa Financial Software Holdings Deserve A Spot On Your Watchlist?
You can't deny that Alfa Financial Software Holdings has grown its earnings per share at a very impressive rate. That's attractive. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. On balance the message seems to be that this stock is worth looking at, at least for a while. You should always think about risks though. Case in point, we've spotted 2 warning signs for Alfa Financial Software Holdings you should be aware of, and 1 of them makes us a bit uncomfortable.
Keen growth investors love to see insider buying. Thankfully, Alfa Financial Software Holdings isn't the only one. You can see a a curated list of British companies which have exhibited consistent growth accompanied by 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.
