In late June, Alpha Group International (LSE: ALPH) joined the FTSE 250 index. This was a major milestone for the company.
Here, I’m going to provide some insight into what this under-the-radar business does. I’m also going to explain why I think investors should consider buying the stock today.
What it does
Alpha Group is a leading provider of enhanced financial solutions to corporations and institutions globally. Working with clients across 50+ countries, it blends intelligent human capabilities with financial technology to provide solutions in relation to FX risk management, mass payments, fund finance, and cash management.
Formerly known as Alpha FX, the company listed on the London Stock Exchange’s AIM in 2017 at a market-cap of £64m. Since then, it’s grown remarkably – led by founder and CEO Morgan Tillbrook – to have a market-cap of £962m.
Why I like it
From an investment perspective, this company’s a lot going for it, in my view. For starters, it has a really strong growth track record. Over the last five years, revenue’s climbed from £24m to £110m (annualised growth of 36%). For this year and next, City analysts expect revenue of £129m and £149m respectively.
It’s also a really profitable business. Between 2018 and 2023, return on capital employed (ROCE) averaged 26%. High ROCE companies tend to be good long-term investments because they can compound their profits.
Additionally, the company has a fast-growing dividend (the yield’s only 0.75% at the moment) and a rock-solid balance sheet. It’s also doing share buybacks (it recently announced a £20m buyback), which should help to drive earnings per share higher.
Finally, it has a driven CEO with a track record of success. It’s worth noting here that founder-led companies are often good investments too.
I am very excited about the future for Alpha, and look forward to us continuing our trajectory of growth and delivering value to our shareholders in the years ahead.
Morgan Tillbrook, founder & CEO of Alpha Group
Add in the fact that the company’s now part of the FTSE 250 index (meaning that a lot more professional fund managers will be able to invest in it) and there’s a lot to like.
The risks
Of course, it’s not perfect. Alpha Group operates in a competitive industry and it’s likely to face competition from some powerful rivals in the years ahead. It’s hard to know how much of a genuine competitive advantage it has.
Another issue here is the valuation – it’s a pricey stock as investors have spotted the growth and quality here. Currently, the forward-looking price-to-earnings (P/E) ratio is about 29. That multiple doesn’t leave any room for error.
Overall though, I think this company has the potential to generate strong returns in the long run. I own its shares (I’m up about 250% since I first bought them in 2019) and I plan to hold them in the years ahead.
This post was originally published on Motley Fool
