Here's Why AXIS Capital Holdings (NYSE:AXS) Has Caught The Eye Of Investors

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 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like AXIS Capital Holdings (NYSE:AXS). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for AXIS Capital Holdings

AXIS Capital Holdings' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that AXIS Capital Holdings' EPS has grown 33% 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.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. AXIS Capital Holdings maintained stable EBIT margins over the last year, all while growing revenue 7.2% to US$5.8b. That's progress.

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.

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

Are AXIS Capital Holdings 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

While AXIS Capital Holdings insiders did net US$526k selling stock over the last year, they invested US$854k, a much higher figure. This overall confidence in the company at current the valuation signals their optimism. Zooming in, we can see that the biggest insider purchase was by Independent Director Stanley Galanski for US$409k worth of shares, at about US$58.45 per share.

The good news, alongside the insider buying, for AXIS Capital Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at US$40m. This considerable investment should help drive long-term value in the business. Even though that's only about 0.6% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Vince Tizzio is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to AXIS Capital Holdings, with market caps between US$4.0b and US$12b, is around US$8.4m.

AXIS Capital Holdings' CEO took home a total compensation package worth US$6.8m in the year leading up to December 2023. That seems pretty reasonable, especially given it's below the median for similar 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is AXIS Capital Holdings Worth Keeping An Eye On?

For growth investors, AXIS Capital Holdings' raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for AXIS Capital Holdings you should be aware of.

The good news is that AXIS Capital Holdings is not the only stock with insider buying. Here's a list of small cap, undervalued companies in the US 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.