If EPS Growth Is Important To You, Arbuthnot Banking Group (LON:ARBB) Presents An Opportunity
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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Arbuthnot Banking Group (LON:ARBB). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Arbuthnot Banking Group with the means to add long-term value to shareholders.
View our latest analysis for Arbuthnot Banking Group
Arbuthnot Banking Group's Improving Profits
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. Which is why EPS growth is looked upon so favourably. It's an outstanding feat for Arbuthnot Banking Group to have grown EPS from UK£0.36 to UK£2.05 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Arbuthnot Banking Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Arbuthnot Banking Group maintained stable EBIT margins over the last year, all while growing revenue 46% to UK£154m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
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 Arbuthnot Banking Group's future profits.
Are Arbuthnot Banking Group Insiders Aligned With All Shareholders?
Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Arbuthnot Banking Group insiders own a meaningful share of the business. Owning 47% of the company, insiders have plenty riding on the performance of the the share price. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. In terms of absolute value, insiders have UK£74m invested in the business, at the current share price. That's nothing to sneeze at!
Does Arbuthnot Banking Group Deserve A Spot On Your Watchlist?
Arbuthnot Banking Group's earnings per share growth have been climbing higher at an appreciable rate. 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. 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 Arbuthnot Banking Group very closely. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Arbuthnot Banking Group that you should be aware of.
Although Arbuthnot Banking Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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.
