Should You Be Adding Applied Industrial Technologies (NYSE:AIT) To Your Watchlist Today?

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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Applied Industrial Technologies (NYSE:AIT), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Applied Industrial Technologies

How Fast Is Applied Industrial Technologies Growing Its Earnings Per Share?

Over the last three years, Applied Industrial Technologies has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, Applied Industrial Technologies' EPS soared from US$7.31 to US$9.38, over the last year. That's a fantastic gain of 28%.

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. EBIT margins for Applied Industrial Technologies remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to US$4.4b. That's encouraging news for the company!

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.

Fortunately, we've got access to analyst forecasts of Applied Industrial Technologies' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Applied Industrial Technologies Insiders Aligned With All Shareholders?

Since Applied Industrial Technologies has a market capitalisation of US$6.4b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$103m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Applied Industrial Technologies, with market caps between US$4.0b and US$12b, is around US$7.8m.

Applied Industrial Technologies' CEO took home a total compensation package worth US$6.4m in the year leading up to June 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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 Applied Industrial Technologies To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Applied Industrial Technologies' strong EPS growth. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. Everyone has their own preferences when it comes to investing but it definitely makes Applied Industrial Technologies look rather interesting indeed. What about risks? Every company has them, and we've spotted 1 warning sign for Applied Industrial Technologies you should know about.

Although Applied Industrial Technologies certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.