Should You Be Adding AdvanSix (NYSE:ASIX) To Your Watchlist Today?
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like AdvanSix (NYSE:ASIX). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide AdvanSix with the means to add long-term value to shareholders.
View our latest analysis for AdvanSix
How Quickly Is AdvanSix Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, AdvanSix has achieved impressive annual EPS growth of 38%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note AdvanSix achieved similar EBIT margins to last year, revenue grew by a solid 23% to US$2.0b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of AdvanSix's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are AdvanSix Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The good news for AdvanSix shareholders is that no insiders reported selling shares in the last year. Add in the fact that Michael Marberry, the Independent Chairman of the company, paid US$25k for shares at around US$34.73 each. It seems that at least one insider is prepared to show the market there is potential within AdvanSix.
Along with the insider buying, another encouraging sign for AdvanSix is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$29m worth of its stock. This considerable investment should help drive long-term value in the business. Even though that's only about 2.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Does AdvanSix Deserve A Spot On Your Watchlist?
AdvanSix's earnings have taken off in quite an impressive fashion. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest AdvanSix belongs near the top of your watchlist. Before you take the next step you should know about the 1 warning sign for AdvanSix that we have uncovered.
The good news is that AdvanSix is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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