Here's Why Ashtead Technology Holdings (LON:AT.) Has Caught The Eye Of Investors

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 currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Ashtead Technology Holdings (LON:AT.). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ashtead Technology Holdings with the means to add long-term value to shareholders.

Our free stock report includes 1 warning sign investors should be aware of before investing in Ashtead Technology Holdings. Read for free now.

Ashtead Technology Holdings' Improving Profits

In the last three years Ashtead Technology Holdings' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Ashtead Technology Holdings' EPS soared from UK£0.27 to UK£0.36, over the last year. That's a commendable gain of 32%.

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. On the revenue front, Ashtead Technology Holdings has done well over the past year, growing revenue by 52% to UK£168m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

See our latest analysis for Ashtead Technology Holdings

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Ashtead Technology Holdings' future EPS 100% free.

Are Ashtead Technology Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the bigger deal is that the Independent Non-Executive Chairman, William Mervyn Frew Shannon, paid UK£72k to buy shares at an average price of UK£5.50. Strong buying like that could be a sign of opportunity.

Is Ashtead Technology Holdings Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Ashtead Technology Holdings' strong EPS growth. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. In essence, your time will not be wasted checking out Ashtead Technology Holdings in more detail. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Ashtead Technology Holdings , and understanding this should be part of your investment process.

Keen growth investors love to see insider activity. Thankfully, Ashtead Technology Holdings isn't the only one. You can see a a curated list of British companies which have exhibited consistent growth accompanied by high insider ownership.

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.