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Does Amedisys (NASDAQ:AMED) Deserve A Spot On Your Watchlist?

Simply Wall St
·4 min read

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Amedisys (NASDAQ:AMED). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Amedisys

How Quickly Is Amedisys Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Who among us would not applaud Amedisys's stratospheric annual EPS growth of 59%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Amedisys's EBIT margins were flat over the last year, revenue grew by a solid 7.0% to US$2.0b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Amedisys's future profits.

Are Amedisys Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Although we did see some insider selling (worth -US$50k) this was overshadowed by a mountain of buying, totalling US$971k in just one year. This makes me even more interested in Amedisys because it suggests that those who understand the company best, are optimistic. It is also worth noting that it was Independent Director Bruce Perkins who made the biggest single purchase, worth US$335k, paying US$167 per share.

Along with the insider buying, another encouraging sign for Amedisys is that insiders, as a group, have a considerable shareholding. Notably, they have an enormous stake in the company, worth US$185m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Does Amedisys Deserve A Spot On Your Watchlist?

Amedisys's earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Amedisys deserves timely attention. However, before you get too excited we've discovered 1 warning sign for Amedisys that you should be aware of.

The good news is that Amedisys 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.

This article by Simply Wall St is general in nature. 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.

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