Here's Why We Think Aecon Group (TSE:ARE) Is Well Worth Watching

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 completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Aecon Group (TSE:ARE), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Aecon Group

How Fast Is Aecon Group Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Who among us would not applaud Aecon Group's stratospheric annual EPS growth of 43%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Aecon Group's EBIT margins were flat over the last year, revenue grew by a solid 2.6% to CA$3.7b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Aecon Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Aecon Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling Aecon Group shares, in the last year. So it's definitely nice that Independent Director John Brace bought CA$50k worth of shares at an average price of around CA$16.40.

Along with the insider buying, another encouraging sign for Aecon Group is that insiders, as a group, have a considerable shareholding. Indeed, they hold CA$15m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 1.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Aecon Group To Your Watchlist?

Aecon Group's earnings per share have taken off like a rocket aimed right at the moon. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Aecon Group belongs on the top of your watchlist. However, before you get too excited we've discovered 2 warning signs for Aecon Group (1 doesn't sit too well with us!) that you should be aware of.

As a growth investor I do like to see insider buying. But Aecon Group isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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