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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you're like me, you might be more interested in profitable, growing companies, like Allied Motion Technologies (NASDAQ:AMOT). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Quickly Is Allied Motion Technologies Increasing Earnings Per Share?
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). That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Allied Motion Technologies has grown EPS by 16% per year. That's a good rate of growth, if it can be sustained.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Allied Motion Technologies maintained stable EBIT margins over the last year, all while growing revenue 23% to US$328m. That's a real positive.
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Allied Motion Technologies EPS 100% free.
Are Allied Motion Technologies Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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 do note that Allied Motion Technologies insiders netted -US$3.2k worth of shares over the last year. On the other hand, Director Michael Winter paid US$49k for shares, at a price of about US$35.35 per share. So, on balance, that's positive.
On top of the insider buying, it's good to see that Allied Motion Technologies insiders have a valuable investment in the business. Given insiders own a small fortune of shares, currently valued at US$65m, they have plenty of motivation to push the business to succeed. At 19% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.
Should You Add Allied Motion Technologies To Your Watchlist?
One important encouraging feature of Allied Motion Technologies is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Of course, just because Allied Motion Technologies is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
The good news is that Allied Motion Technologies is not the only growth stock with insider buying. Here's a a list of them... 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
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.