U.S. Markets closed
  • S&P Futures

    4,269.25
    -7.50 (-0.18%)
     
  • Dow Futures

    33,927.00
    -36.00 (-0.11%)
     
  • Nasdaq Futures

    13,456.25
    -37.00 (-0.27%)
     
  • Russell 2000 Futures

    1,987.40
    -1.70 (-0.09%)
     
  • Crude Oil

    87.71
    -0.40 (-0.45%)
     
  • Gold

    1,779.30
    +2.60 (+0.15%)
     
  • Silver

    19.75
    +0.02 (+0.12%)
     
  • EUR/USD

    1.0184
    +0.0004 (+0.0407%)
     
  • 10-Yr Bond

    2.8930
    +0.0690 (+2.44%)
     
  • Vix

    19.90
    +0.21 (+1.07%)
     
  • GBP/USD

    1.2050
    -0.0001 (-0.0096%)
     
  • USD/JPY

    134.9300
    -0.1600 (-0.1184%)
     
  • BTC-USD

    23,341.93
    -518.78 (-2.17%)
     
  • CMC Crypto 200

    554.64
    -18.18 (-3.17%)
     
  • FTSE 100

    7,515.75
    -20.31 (-0.27%)
     
  • Nikkei 225

    29,222.77
    0.00 (0.00%)
     

Should You Be Adding Archer-Daniels-Midland (NYSE:ADM) To Your Watchlist Today?

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Archer-Daniels-Midland (NYSE:ADM). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Archer-Daniels-Midland

Archer-Daniels-Midland's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Archer-Daniels-Midland has grown EPS by 40% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Archer-Daniels-Midland achieved similar EBIT margins to last year, revenue grew by a solid 26% to US$94b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
earnings-and-revenue-history

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Archer-Daniels-Midland?

Are Archer-Daniels-Midland Insiders Aligned With All Shareholders?

Since Archer-Daniels-Midland has a market capitalisation of US$46b, we wouldn't expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$237m. While that is a lot of skin in the game, we note this holding only totals to 0.5% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.

Does Archer-Daniels-Midland Deserve A Spot On Your Watchlist?

Archer-Daniels-Midland's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Archer-Daniels-Midland very closely. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Archer-Daniels-Midland (at least 1 which can't be ignored) , and understanding these should be part of your investment process.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here