Here's Why Aya Gold & Silver (TSE:AYA) Has Caught The Eye Of Investors

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Aya Gold & Silver (TSE:AYA). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Aya Gold & Silver

How Quickly Is Aya Gold & Silver 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) outcomes. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Aya Gold & Silver has achieved impressive annual EPS growth of 42%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. Unfortunately, revenue is down and so are margins. This is less than stellar 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.

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

Are Aya Gold & Silver 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's worth noting that there was some insider selling of Aya Gold & Silver shares last year, worth US$153k. This falls short of the share acquisition by Vice President of Corporate Development & Investor Relations Alex Ball, who has acquired US$399k worth of shares, at an average price of US$13.29. Overall, that is something good to take away.

The good news, alongside the insider buying, for Aya Gold & Silver bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$167m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Aya Gold & Silver's CEO, Benoit La Salle, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Aya Gold & Silver, with market caps between US$400m and US$1.6b, is around US$1.8m.

Aya Gold & Silver offered total compensation worth US$1.3m to its CEO in the year to December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does Aya Gold & Silver Deserve A Spot On Your Watchlist?

Aya Gold & Silver's earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Aya Gold & Silver belongs near the top of your watchlist. Even so, be aware that Aya Gold & Silver is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

The good news is that Aya Gold & Silver is not the only stock with insider buying. Here's a list of small cap, undervalued companies in CA 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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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.