We Ran A Stock Scan For Earnings Growth And ASM International (AMS:ASM) Passed With Ease

September 04, 2022
  •  Updated
October 31, 2022
Source: Shutterstock

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in ASM International (AMS:ASM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ASM International with the means to add long-term value to shareholders.

See our latest analysis for ASM International

How Quickly Is ASM International Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that ASM International's EPS has grown 32% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. EBIT margins for ASM International remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 36% to €2.0b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

ENXTAM:ASM Earnings and Revenue History September 4th 2022

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, small purchases are not always indicative of conviction, and insiders don't always get it right.

With strong conviction, ASM International insiders have stood united by refusing to sell shares over the last year. But more importantly, CFO & Member of Management Board Paulus Antonius Henricus Verhagen spent €70k acquiring shares, doing so at an average price of €279. Strong buying like that could be a sign of opportunity.

Recent insider purchases of ASM International stock is not the only way management has kept the interests of the general public shareholders in mind. To be specific, the CEO is paid modestly when compared to company peers of the same size. The median total compensation for CEOs of companies similar in size to ASM International, with market caps over €8.0b, is around €4.8m.

ASM International's CEO took home a total compensation package of €2.3m in the year prior to December 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add ASM International To Your Watchlist?

You can't deny that ASM International has grown its earnings per share at a very impressive rate. That's attractive. To add to the positives, ASM International has recorded instances of insider buying and a modest executive pay to boot. On balance the message seems to be that this stock is worth looking at, at least for a while. You should always think about risks though. Case in point, we've spotted 1 warning sign for ASM International you should be aware of.

The good news is that ASM International is not the only growth stock with insider buying. Here's a list of them... 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.

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