Here's Why I Think A.A.A. Allgemeine Anlageverwaltung (FRA:AAA) Is An Interesting Stock

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like A.A.A. Allgemeine Anlageverwaltung (FRA:AAA), 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. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for A.A.A. Allgemeine Anlageverwaltung

A.A.A. Allgemeine Anlageverwaltung's Earnings Per Share Are 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). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that A.A.A. Allgemeine Anlageverwaltung has managed to grow EPS by 33% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. While A.A.A. Allgemeine Anlageverwaltung's EBIT margins are down, it's not all bad news as revenues are, at least, stable. That doesn't inspire a great deal of confidence.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

A.A.A. Allgemeine Anlageverwaltung isn't a huge company, given its market capitalization of €39m. That makes it extra important to check on its balance sheet strength.

Are A.A.A. Allgemeine Anlageverwaltung Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. I discovered that the median total compensation for the CEOs of companies like A.A.A. Allgemeine Anlageverwaltung with market caps under €180m is about €363k.

A.A.A. Allgemeine Anlageverwaltung offered total compensation worth €274k to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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 a culture of integrity, in a broader sense.

Should You Add A.A.A. Allgemeine Anlageverwaltung To Your Watchlist?

You can't deny that A.A.A. Allgemeine Anlageverwaltung has grown its earnings per share at a very impressive rate. That's attractive. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. So I'd argue this is the kind of stock worth watching, even if it isn't great value today. Still, you should learn about the 5 warning signs we've spotted with A.A.A. Allgemeine Anlageverwaltung (including 2 which don't sit too well with us) .

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.