Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Alaska Communications Systems Group (NASDAQ:ALSK). Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Quickly Is Alaska Communications Systems Group 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. As a tree reaches steadily for the sky, Alaska Communications Systems Group’s EPS has grown 22% each year, compound, over three years. If the company can sustain that sort of growth, we’d expect shareholders to come away winners.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Alaska Communications Systems Group reported flat revenue and EBIT margins over the last year. That’s not a major concern but nor does it point to the long term growth we like to see.
Since Alaska Communications Systems Group is no giant, with a market capitalization of US$96m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Alaska Communications Systems Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We note that Alaska Communications Systems Group insiders spent US$193k on stock, over the last year; in contrast, we didn’t see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident. Zooming in, we can see that the biggest insider purchase was by Karen Singer for US$188k worth of shares, at about US$1.71 per share.
Is Alaska Communications Systems Group Worth Keeping An Eye On?
You can’t deny that Alaska Communications Systems Group has grown its earnings per share at a very impressive rate. That’s attractive. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. So on this analysis I believe Alaska Communications Systems Group is probably worth spending some time on. Now, you could try to make up your mind on Alaska Communications Systems Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that Alaska Communications Systems Group is not the only growth stock with insider buying. Here’s 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
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