Do Airtel Africa's (LON:AAF) 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. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Airtel Africa (LON:AAF). 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 Airtel Africa

How Fast Is Airtel Africa Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. To the delight of shareholders, Airtel Africa's EPS soared from US$0.11 to US$0.18, over the last year. That's a fantastic gain of 59%.

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. The music to the ears of Airtel Africa shareholders is that EBIT margins have grown from 30% to 33% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Airtel Africa's forecast profits?

Are Airtel Africa 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

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 real excitement comes from the US$50k that Independent Non-Executive Director Ravi Rajagopal spent buying shares (at an average price of about US$1.40). It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Recent insider purchases of Airtel Africa stock is not the only way management has kept the interests of the general public shareholders in mind. To be specific, the CEO is paid modestly when compared to company peers of the same size. Our analysis has discovered that the median total compensation for the CEOs of companies like Airtel Africa with market caps between US$4.0b and US$12b is about US$3.2m.

The Airtel Africa CEO received US$1.9m in compensation for the year ending March 2022. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Airtel Africa To Your Watchlist?

For growth investors, Airtel Africa's raw rate of earnings growth is a beacon in the night. To add to the positives, Airtel Africa has recorded instances of insider buying and a modest executive pay to boot. All in all, this stock is worth the time to delve deeper into the details. Even so, be aware that Airtel Africa is showing 1 warning sign in our investment analysis , you should know about...

The good news is that Airtel Africa is not the only growth stock with insider buying. Here's a list of them... 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.