Here's Why Andrews Sykes Group (LON:ASY) Has Caught The Eye Of Investors
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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 Andrews Sykes Group (LON:ASY), 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 Andrews Sykes Group with the means to add long-term value to shareholders.
View our latest analysis for Andrews Sykes Group
Andrews Sykes Group'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. Over the last three years, Andrews Sykes Group has grown EPS by 4.3% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.
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. EBIT margins for Andrews Sykes Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 10% to UK£83m. 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.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Andrews Sykes Group Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Andrews Sykes Group shares worth a considerable sum. Indeed, they hold UK£11m worth of its stock. This considerable investment should help drive long-term value in the business. Even though that's only about 4.0% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Andrews Sykes Group, with market caps between UK£159m and UK£638m, is around UK£815k.
The Andrews Sykes Group CEO received UK£431k in compensation for the year ending December 2021. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add Andrews Sykes Group To Your Watchlist?
As previously touched on, Andrews Sykes Group is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for Andrews Sykes Group, but the pleasant picture gets better than that. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. You still need to take note of risks, for example - Andrews Sykes Group has 1 warning sign we think you should be aware of.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
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
