Do Admiral Group's (LON:ADM) Earnings Warrant Your Attention?

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.' 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.

In contrast to all that, many investors prefer to focus on companies like Admiral Group (LON:ADM), 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.

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How Quickly Is Admiral Group Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Admiral Group's EPS has grown 30% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. It's noted that Admiral Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The music to the ears of Admiral Group shareholders is that EBIT margins have grown from 14% to 21% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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.

View our latest analysis for Admiral Group

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Admiral Group.

Are Admiral Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Admiral Group top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Independent Non-Executive Chairman, Michael Rogers, paid UK£119k to buy shares at an average price of UK£35.53. Strong buying like that could be a sign of opportunity.

The good news, alongside the insider buying, for Admiral Group bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth UK£701m. 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.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Milena Mondini-de-Focatiis is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Admiral Group, with market caps over UK£6.0b, is about UK£5.0m.

Admiral Group offered total compensation worth UK£4.1m to its CEO in the year to December 2024. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Is Admiral Group Worth Keeping An Eye On?

For growth investors, Admiral Group's raw rate of earnings growth is a beacon in the night. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. Still, you should learn about the 3 warning signs we've spotted with Admiral Group (including 2 which can't be ignored).

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Admiral Group, you'll probably love this curated collection of companies in GB that have an attractive valuation alongside 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.