Stock Analysis

With EPS Growth And More, Ashtead Group (LON:AHT) Is Interesting

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LSE:AHT
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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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Ashtead Group (LON:AHT). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Ashtead Group

How Quickly Is Ashtead Group Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Ashtead Group managed to grow EPS by 10% per year, over three years. That's a pretty good rate, if the company can sustain it.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Ashtead Group shareholders can take confidence from the fact that EBIT margins are up from 21% to 24%, and revenue is growing. That's great to see, on both counts.

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.

earnings-and-revenue-history
LSE:AHT Earnings and Revenue History March 26th 2022

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Ashtead Group EPS 100% free.

Are Ashtead Group Insiders Aligned With All Shareholders?

Since Ashtead Group has a market capitalization of UK£23b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. With a whopping US$46m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to make me think that management will be very focussed on long term growth.

Should You Add Ashtead Group To Your Watchlist?

One positive for Ashtead Group is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Ashtead Group that you should be aware of.

Although Ashtead Group certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.

Valuation is complex, but we're helping make it simple.

Find out whether Ashtead Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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