Here's Why We Think ACEA (BIT:ACE) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like ACEA (BIT:ACE). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for ACEA

How Fast Is ACEA Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, ACEA has grown EPS by 12% per year. That's a good rate of growth, if it can be sustained.

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. While we note ACEA's EBIT margins were flat over the last year, revenue grew by a solid 9.6% to €3.4b. That's progress.

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.

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 ACEA.

Are ACEA Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that ACEA insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth €123m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

Does ACEA Deserve A Spot On Your Watchlist?

One important encouraging feature of ACEA is that it is growing profits. 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. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with ACEA (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

You can invest in 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.

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.

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