We Ran A Stock Scan For Earnings Growth And ASM International (AMS:ASM) Passed With Ease
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 ASM International (AMS:ASM). 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.
View our latest analysis for ASM International
How Fast Is ASM International 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. ASM International's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 38%. 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 ASM International achieved similar EBIT margins to last year, revenue grew by a solid 9.3% to €2.6b. 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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of ASM International's forecast profits?
Are ASM International 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We did see some selling in the last twelve months, but that's insignificant compared to the whopping €3.4m that the CTO & Member of the Management Board, Hichem M'Saad spent acquiring shares. The average price paid was about €343. Big purchases like that are well worth noting, especially for those who like to follow the insider money.
The good news, alongside the insider buying, for ASM International bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold €20m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.07% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because ASM International's CEO, Benjamin Loh, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations over €7.4b, like ASM International, the median CEO pay is around €4.1m.
The ASM International CEO received €3.6m in compensation for the year ending December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Is ASM International Worth Keeping An Eye On?
ASM International's earnings per share growth have been climbing higher at an appreciable rate. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest ASM International belongs near the top of your watchlist. We should say that we've discovered 1 warning sign for ASM International that you should be aware of before investing here.
The good news is that ASM International is not the only growth stock with insider buying. Here's a list of growth-focused companies in NL with insider buying in the last three months!
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.
