If EPS Growth Is Important To You, ASM International (AMS:ASM) Presents An Opportunity

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 currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like ASM International (AMS:ASM). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for ASM International

How Quickly Is ASM International Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that ASM International's EPS has grown 26% 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.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. ASM International maintained stable EBIT margins over the last year, all while growing revenue 36% to €2.7b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for ASM International?

Are ASM International 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

While there was some insider selling, that pales in comparison to the €3.4m that the CTO & Member of the Management Board, Hichem M'Saad spent acquiring shares. We should note the average purchase price was around €343. Big purchases like that are well worth noting, especially for those who like to follow the insider money.

Along with the insider buying, another encouraging sign for ASM International is that insiders, as a group, have a considerable shareholding. To be specific, they have €16m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.07% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because ASM International's CEO, Benjamin Loh, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations over €7.3b, like ASM International, the median CEO pay is around €3.2m.

ASM International offered total compensation worth €2.7m to its CEO in the year to December 2022. That is actually below the median for CEO's of similarly sized companies. 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 a culture of integrity, in a broader sense.

Is ASM International Worth Keeping An Eye On?

For growth investors, ASM International's raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. Astute investors will want to keep this stock on watch. It is worth noting though that we have found 1 warning sign for ASM International that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, ASM International isn't the only one. You can see a a free list of them here.

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.