Stock Analysis

I Ran A Stock Scan For Earnings Growth And Atlantic Grupa d.d (ZGSE:ATGR) Passed With Ease

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ZGSE:ATGR
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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Atlantic Grupa d.d (ZGSE:ATGR). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Atlantic Grupa d.d

How Quickly Is Atlantic Grupa d.d Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Atlantic Grupa d.d has grown EPS by 33% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Atlantic Grupa d.d's EBIT margins were flat over the last year, revenue grew by a solid 3.6% to HRK5.6b. That's a real positive.

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.

ZGSE:ATGR Earnings and Revenue History July 6th 2020
ZGSE:ATGR Earnings and Revenue History July 6th 2020

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Atlantic Grupa d.d's balance sheet strength, before getting too excited.

Are Atlantic Grupa d.d Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Atlantic Grupa d.d insiders own a significant number of shares certainly appeals to me. In fact, they own 56% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. And their holding is extremely valuable at the current share price, totalling HRK2.3b. Now that's what I call some serious skin in the game!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like Atlantic Grupa d.d with market caps between HRK2.7b and HRK11b is about HRK6.8m.

The Atlantic Grupa d.d CEO received HRK4.5m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Should You Add Atlantic Grupa d.d To Your Watchlist?

You can't deny that Atlantic Grupa d.d has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the takeaway for me is that Atlantic Grupa d.d is worth keeping an eye on. We don't want to rain on the parade too much, but we did also find 2 warning signs for Atlantic Grupa d.d (1 can't be ignored!) that you need to be mindful of.

Although Atlantic Grupa d.d 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.

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About ZGSE:ATGR

Atlantic Grupa d.d

Atlantic Grupa d.d., together with its subsidiaries, engages in the research, development, production, and distribution fast moving consumer goods in Southeast Europe, the European markets, Russia, and the Commonwealth of Independent States.

Flawless balance sheet second-rate dividend payer.