Is Now The Time To Put ArcelorMittal South Africa (JSE:ACL) On Your Watchlist?
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. 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.
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 ArcelorMittal South Africa (JSE:ACL). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for ArcelorMittal South Africa
How Quickly Is ArcelorMittal South Africa Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, ArcelorMittal South Africa has achieved impressive annual EPS growth of 47%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of ArcelorMittal South Africa shareholders is that EBIT margins have grown from 11% to 19% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
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.
ArcelorMittal South Africa isn't a huge company, given its market capitalisation of R5.1b. That makes it extra important to check on its balance sheet strength.
Are ArcelorMittal South Africa Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own ArcelorMittal South Africa shares worth a considerable sum. As a matter of fact, their holding is valued at R317m. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 6.2% of the shares on issue for the business, an appreciable amount considering the market cap.
Does ArcelorMittal South Africa Deserve A Spot On Your Watchlist?
ArcelorMittal South Africa's earnings have taken off in quite an impressive fashion. 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 ArcelorMittal South Africa very closely. You still need to take note of risks, for example - ArcelorMittal South Africa has 2 warning signs we think you should be aware of.
Although ArcelorMittal South Africa 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.
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