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It’s only natural that many investors, especially those new to the game, would rather buy “hot” stocks with a good story, even if those companies are losing money. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you are the patsy.” When buying such historical stocks, investors are all too often the fools.
So if you’re like me, you might be more interested in profitable and growing businesses like Alpha and Omega semiconductor (NASDAQ: AOSL). While that doesn’t make stocks worth buying at all costs, you can’t deny that successful capitalism ultimately requires profits. While a well-funded business can suffer losses for years, unless its owners have an endless appetite to subsidize the customer, it will eventually have to generate a profit, or else take its last breath.
Check out our latest review for Alpha and Omega Semiconductor
How fast are Alpha and Omega Semiconductor increasing their earnings per share?
In a capitalist society, capital runs after profits, which means that stock prices tend to increase with earnings per share (EPS). So like the hint of a smile on a face I love, growing PSE usually makes me look twice. So you can imagine it almost knocked me off the ground when I realized that Alpha and Omega Semiconductor increased their EPS from US $ 0.079 to US $ 2.73 in a short year. When you see profits growing so quickly, it often means good things ahead for the business. But the key is to discern if something deep has changed, or if it’s just a one-time boost.
One way to check the growth of a business is to look at the evolution of its income and its margins before interest and taxes (EBIT). The good news is that Alpha and Omega Semiconductor’s revenues are increasing and EBIT margins have improved 11.8 percentage points to 11% over the past year. It’s great to see, on both counts.
In the graph below, you can see how the company has increased its profit and revenue over time. Click on the graph to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not watch this free interactive visualization of Alpha and Omega Semiconductor forecast benefits?
Are Alpha and Omega Semiconductor Insiders Aligned with All Shareholders?
I like that business leaders have some skin in the game, so to speak, because it increases the alignment of incentives between the people who run the business and its real owners. So it’s good to see that Alpha and Omega Semiconductor insiders have significant capital invested in the stock. Indeed, they have invested a sparkling mountain of wealth, currently valued at US $ 233 million. This 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 took off like a rocket pointed straight at the moon. This BPA growth certainly has my attention, and the large insider ownership only serves to pique my interest further. Sometimes the rapid growth of BPA is a sign that the business has reached an inflection point; and I like those. So yes, on this short review, I think it’s worth considering Alpha and Omega Semiconductor for a place on your watch list. Still, you should educate yourself on 2 warning signs we spotted with Alpha and Omega Semiconductor.
You can invest in any business. But if you’d rather focus on stocks that have been the subject of insider buys, here’s a list of companies that have made insider buys in the past three months.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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