Is Now The Time To Put Axalta Coating Systems (NYSE:AXTA) On Your Watchlist?
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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Axalta Coating Systems (NYSE:AXTA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Axalta Coating Systems
Axalta Coating Systems' Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Axalta Coating Systems' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 39%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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 Axalta Coating Systems achieved similar EBIT margins to last year, revenue grew by a solid 7.1% to US$5.1b. 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. 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 Axalta Coating Systems' future profits.
Are Axalta Coating Systems Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.
The US$1.3m worth of shares that insiders sold during the last 12 months pales in comparison to the US$3.1m they spent on acquiring shares in the company. This adds to the interest in Axalta Coating Systems because it suggests that those who understand the company best, are optimistic. We also note that it was the CEO, President & Director, Chrishan Anthon Villavarayan, who made the biggest single acquisition, paying US$1.0m for shares at about US$29.20 each.
On top of the insider buying, it's good to see that Axalta Coating Systems insiders have a valuable investment in the business. To be specific, they have US$24m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Does Axalta Coating Systems Deserve A Spot On Your Watchlist?
Axalta Coating Systems' earnings per share growth have been climbing higher at an appreciable rate. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Axalta Coating Systems belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Axalta Coating Systems you should be aware of, and 1 of them makes us a bit uncomfortable.
Keen growth investors love to see insider buying. Thankfully, Axalta Coating Systems isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by recent insider buying.
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.
