Here's Why We Think Affiliated Managers Group (NYSE:AMG) Is Well Worth Watching

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.' 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 Affiliated Managers Group (NYSE:AMG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Affiliated Managers Group with the means to add long-term value to shareholders.

See our latest analysis for Affiliated Managers Group

Affiliated Managers Group's Improving Profits

Over the last three years, Affiliated Managers Group 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. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Affiliated Managers Group's EPS grew from US$13.63 to US$31.96, over the previous 12 months. Year on year growth of 134% is certainly a sight to behold.

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. The previous 12 months are something that Affiliated Managers Group will want to put behind them after seeing a drop in EBIT margin and revenue for the period. Shareholders will be hoping for a change in fortunes if they're looking for profit growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Affiliated Managers Group's future EPS 100% free.

Are Affiliated Managers Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

First and foremost; there we saw no insiders sell Affiliated Managers Group shares in the last year. But the important part is that Independent Director Reuben Jeffery spent US$501k buying stock, at an average price of US$137. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.

Along with the insider buying, another encouraging sign for Affiliated Managers Group is that insiders, as a group, have a considerable shareholding. Holding US$75m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Does Affiliated Managers Group Deserve A Spot On Your Watchlist?

Affiliated Managers Group's earnings have taken off in quite an impressive fashion. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Affiliated Managers Group deserves timely attention. It is worth noting though that we have found 2 warning signs for Affiliated Managers Group (1 is a bit concerning!) that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Affiliated Managers Group 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.