Here's Why We Think AdvanSix (NYSE:ASIX) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

In contrast to all that, many investors prefer to focus on companies like AdvanSix (NYSE:ASIX), which has not only revenues, but also profits. 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.

Check out the opportunities and risks within the US Chemicals industry.

How Fast Is AdvanSix Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. To the delight of shareholders, AdvanSix has achieved impressive annual EPS growth of 49%, 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. AdvanSix shareholders can take confidence from the fact that EBIT margins are up from 9.1% to 14%, 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. To see the actual numbers, click on the chart.

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 AdvanSix.

Are AdvanSix 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's nice to see that there have been no reports of any insiders selling shares in AdvanSix in the previous 12 months. With that in mind, it's heartening that Michael Marberry, the Independent Chairman of the company, paid US$25k for shares at around US$34.73 each. It seems that at least one insider is prepared to show the market there is potential within AdvanSix.

Along with the insider buying, another encouraging sign for AdvanSix is that insiders, as a group, have a considerable shareholding. To be specific, they have US$25m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 2.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is AdvanSix Worth Keeping An Eye On?

AdvanSix's earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest AdvanSix belongs near the top of your watchlist. Even so, be aware that AdvanSix is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

Keen growth investors love to see insider buying. Thankfully, AdvanSix 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.