Do Asbury Automotive Group's (NYSE:ABG) Earnings Warrant Your Attention?
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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Asbury Automotive Group (NYSE:ABG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Asbury Automotive Group with the means to add long-term value to shareholders.
See our latest analysis for Asbury Automotive Group
How Fast Is Asbury Automotive Group Growing Its Earnings Per Share?
Over the last three years, Asbury Automotive Group has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Asbury Automotive Group's EPS shot from US$26.75 to US$45.99, over the last year. It's not often a company can achieve year-on-year growth of 72%. That could be a sign that the business has reached a true inflection point.
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. It's noted that Asbury Automotive Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Asbury Automotive Group achieved similar EBIT margins to last year, revenue grew by a solid 57% to US$15b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Asbury Automotive Group's forecast profits?
Are Asbury Automotive Group Insiders Aligned With All Shareholders?
Owing to the size of Asbury Automotive Group, we wouldn't expect insiders to hold a significant proportion of the company. 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. As a matter of fact, their holding is valued at US$30m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.6%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Does Asbury Automotive Group Deserve A Spot On Your Watchlist?
Asbury Automotive Group's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Asbury Automotive Group very closely. It is worth noting though that we have found 2 warning signs for Asbury Automotive Group that you need to take into consideration.
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.
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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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