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Is buying Afterpay shares more trouble than its worth?

Despite a number of regulatory concerns so far this year, the Afterpay Touch Group Ltd (ASX: APT) share price has still managed to climb 123% higher in 2019 – but could it be more trouble than its worth?

Why the Afterpay share price has surged higher in 2019

In what has been a similar story to 2018, Afterpay has continued its status as a top performing growth stock within the S&P/ASX 200 (INDEXASX: XJO) index.

The 123% share price increase has been built on a foundation of strong earnings, a successful expansion into the United States (US) and increased merchant networks.

In its half-year results in February, the company reported underlying sales up 147% to $2.3 billion with a 118% increase in active customers to 3.1 million.

The company still reported a loss after tax of $22 million, but saw its total income soar 91% higher to $116.1 million as it looks to mature its operations and become a profitable, long-term growth company.

Afterpay’s foray into the US has thus far proved to be a success, despite strong competition and more alternatives, with the company recently raising $330 million to fund its expansion.

The company reported in June that its US business has generated $1.7 billion in annualised underlying sales in just over a year, while also acquiring 1.5 million US customers that are making purchases through its 3,300 merchant partners.

Notably, Afterpay has managed to do all of this while also expanding its operations back in Australia and continuing to boost sales.

Why it might not be worth investing (yet)

However, a number of insider sales from its high-profile co-founders has raised concerns about whether Afterpay’s leadership are in this for the long-haul.

Nick Molnar and Anthony Eisen still have sizeable stakes in the business but have made moves to translate some of those big equity stakes into cash, including the recent sale of $100 million worth of shares.

While the company recently announced big leadership changes, including Eisen ascending to the CEO role and Molnar becoming Global Revenue Officer, the stock has been further plagued by an ongoing Australian Transaction Reports and Analysis Centre (AUSTRAC) audit requirement and the Senate Inquiry conducted earlier in 2019.

For me, the Afterpay share price might be a little high at the moment to buy in with so much uncertainty swirling, despite its growth prospects. I’d be considering the likes of Altium Ltd (ASX: ALU) instead.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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