Is Now The Time To Put Alphamin Resources (CVE:AFM) On Your Watchlist?

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Alphamin Resources (CVE:AFM). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Alphamin Resources

How Fast Is Alphamin Resources Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Alphamin Resources’s EPS went from US$0.002 to US$0.065 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

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. Alphamin Resources shareholders can take confidence from the fact that EBIT margins are up from 27% to 55%, and revenue is growing. 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. For finer detail, click on the image.

earnings-and-revenue-history

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Alphamin Resources Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, 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.

Not only did Alphamin Resources insiders refrain from selling stock during the year, but they also spent US$144k buying it. That’s nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by Independent Director Pieter Pretorius for CA$90k worth of shares, at about CA$0.65 per share.

I do like that insiders have been buying shares in Alphamin Resources, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalizations between US$400m and US$1.6b, like Alphamin Resources, the median CEO pay is around US$1.5m.

The Alphamin Resources CEO received US$882k in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn’t a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I’d also argue reasonable pay levels attest to good decision making more generally.

Does Alphamin Resources Deserve A Spot On Your Watchlist?

Alphamin Resources’s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that Alphamin Resources is at an inflection point, given the EPS growth. If so, then it the potential for further gains probably merit a spot on your watchlist. We should say that we’ve discovered 3 warning signs for Alphamin Resources that you should be aware of before investing here.

The good news is that Alphamin Resources is not the only growth stock with insider buying. Here’s a list of them… 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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