Here's Why ABM Industries (NYSE:ABM) Has Caught The Eye Of Investors
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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like ABM Industries (NYSE:ABM), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ABM Industries with the means to add long-term value to shareholders.
View our latest analysis for ABM Industries
How Fast Is ABM Industries Growing?
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. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that ABM Industries' EPS has grown 22% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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 ABM Industries achieved similar EBIT margins to last year, revenue grew by a solid 25% to US$7.8b. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of ABM Industries' forecast profits?
Are ABM Industries Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Our analysis into ABM Industries has shown that insiders have sold US$93k worth of shares over the last 12 months. But this is outweighed by the trades from Executive VP and Chief Strategy & Transformation Officer Joshua Feinberg who spent US$248k buying shares, at an average price of around US$39.16. And that's a reason to be optimistic.
On top of the insider buying, it's good to see that ABM Industries insiders have a valuable investment in the business. To be specific, they have US$37m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Is ABM Industries Worth Keeping An Eye On?
For growth investors, ABM Industries' raw rate of earnings growth is a beacon in the night. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for ABM Industries (1 doesn't sit too well with us!) that you need to be mindful of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of ABM Industries, you'll probably love this free list of growing companies that insiders are buying.
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.
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