Stock Analysis

Here's Why We Think Azorim-Investment Development & Construction (TLV:AZRM) Is Well Worth Watching

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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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

View our latest analysis for Azorim-Investment Development & Construction

Azorim-Investment Development & Construction's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Impressively, Azorim-Investment Development & Construction has grown EPS by 35% 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 beaming. EPS growth figures have also been helped by share buybacks, showing the market that the company is in a position of financial strength, allowing it to return capital to shareholders.

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. Azorim-Investment Development & Construction's EBIT margins have actually improved by 3.2 percentage points in the last year, to reach 17%, but, on the flip side, revenue was down 30%. While not disastrous, these figures could be better.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

TASE:AZRM Earnings and Revenue History March 17th 2023

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Azorim-Investment Development & Construction Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Azorim-Investment Development & Construction insiders own a significant number of shares certainly is appealing. In fact, they own 66% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. That level of investment from insiders is nothing to sneeze at.

Is Azorim-Investment Development & Construction Worth Keeping An Eye On?

You can't deny that Azorim-Investment Development & Construction has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Azorim-Investment Development & Construction's continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Still, you should learn about the 2 warning signs we've spotted with Azorim-Investment Development & Construction (including 1 which can't be ignored).

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

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

Find out whether Azorim-Investment Development & Construction 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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