Is Now The Time To Put AXA (EPA:CS) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like AXA (EPA:CS), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for AXA

AXA's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. To the delight of shareholders, AXA has achieved impressive annual EPS growth of 58%, 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.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of AXA's revenue last year was revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. We note that while EBIT margins have improved from 6.6% to 9.3%, the company has actually reported a fall in revenue by 11%. That's not a good look.

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 AXA's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are AXA Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a €68b company like AXA. But we do take comfort from the fact that they are investors in the company. Holding €71m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Is AXA Worth Keeping An Eye On?

AXA's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, AXA is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. What about risks? Every company has them, and we've spotted 2 warning signs for AXA (of which 1 makes us a bit uncomfortable!) you should know about.

Although AXA certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.