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.
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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.
