Should You Be Adding ASM International (AMS:ASM) To Your Watchlist Today?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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.

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How Fast Is ASM International Growing?

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. That makes EPS growth an attractive quality for any company. To the delight of shareholders, ASM International has achieved impressive annual EPS growth of 39%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. ASM International shareholders can take confidence from the fact that EBIT margins are up from 26% to 30%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

Check out our latest analysis for ASM International

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 ASM International.

Are ASM International 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news is that ASM International insiders spent a whopping €1.3m on stock in just one year, without so much as a single sale. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. It is also worth noting that it was CEO & Chairman of the Management Board Hichem M'Saad who made the biggest single purchase, worth €658k, paying €380 per share.

Along with the insider buying, another encouraging sign for ASM International is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at €21m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.09% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because ASM International's CEO, Hichem M'Saad, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations over €6.9b, like ASM International, the median CEO pay is around €4.6m.

ASM International's CEO took home a total compensation package worth €3.8m in the year leading up to December 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does ASM International Deserve A Spot On Your Watchlist?

ASM International's earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe ASM International deserves timely attention. Before you take the next step you should know about the 1 warning sign for ASM International that we have uncovered.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of ASM International, you'll probably love this curated collection of companies in NL that have an attractive valuation alongside 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.