Is ALS Limited (ASX:ALQ) a Buy Amid Strong Earnings Growth and a 39.9% YTD Rally?

ALS Limited (ASX:ALQ) has captured investor attention in 2025, with a 39.9% year-to-date rally in its share price and robust financial performance in the first half of fiscal 2026. The company's recent results, coupled with favorable technical indicators, have sparked debate about whether the stock remains a compelling buy. This analysis evaluates ALS's fundamental and technical strengths to determine if the rally has room to run.

Fundamental Strength: Earnings Growth and Strategic Momentum

ALS's H1 FY26 results underscore its resilience and growth potential. Underlying revenue surged 13.3% to $1.66 billion, while underlying EBIT rose 14.7% to $287.2 million, driven by strong performance in the Commodities division and improved operations in Life Sciences. The Commodities segment, a key revenue driver, maintained healthy margins at 31.3%, despite pricing pressures, while the Life Sciences division saw growth in Food and Environmental services.

The company's financial discipline is equally impressive. Net debt was reduced by 16.8% to $1.15 billion following an equity raise, and free cash flow grew 10.8% to $303.9 million. Management raised FY26 organic revenue growth guidance to 6–8%, with a target of $3.3 billion in revenue and $600 million in underlying EBIT by FY27. These metrics suggest ALS is well-positioned to capitalize on long-term trends in resource demand and scientific innovation.

Technical Validation: Momentum and Breakout Potential

From a technical perspective, ALS's stock has exhibited strong bullish signals. The 14-day RSI stands at 66.467, indicating moderate buyer momentum. Moving averages, including the 5-day, 50-day, and 200-day, are all below the current price of $22.15, reinforcing an uptrend. Analysts have upgraded the one-year price target to $23.55, a 11.46% increase from the prior estimate of $21.13.

Key resistance levels are critical to monitor. The 52-week high of $22.69 is a near-term hurdle, while the revised price target of $23.55 represents a longer-term breakout threshold. Historical chart patterns, such as a potential outside week on August 4th, suggest strategic entry points for traders, with stop-loss levels identified below $17.67. Additionally, ALS's beta coefficient of 0.92 indicates it is less volatile than the broader market, offering a relatively stable growth profile.

Balancing Risks and Rewards

While ALS's fundamentals and technicals are largely positive, investors should remain cautious. The stock's 39.9% YTD gain has priced in significant future growth expectations, and analysts note it may be undervalued by traditional metrics but carries elevated forward-looking assumptions. Macroeconomic factors, such as global commodity demand and regulatory shifts in the Life Sciences sector, could impact performance.

Conclusion: A Buy with Caution

ALS Limited's combination of strong earnings growth, disciplined capital management, and favorable technical indicators supports its case as a buy. The company's raised guidance and strategic investments in laboratory expansion further bolster its long-term outlook. However, the rally's magnitude and reliance on future growth assumptions warrant careful monitoring of key resistance levels and macroeconomic trends. For investors with a medium-term horizon and risk tolerance, ALS appears well-positioned to continue its upward trajectory.