Here's Why We Think Axalta Coating Systems (NYSE:AXTA) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Axalta Coating Systems (NYSE:AXTA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Axalta Coating Systems with the means to add long-term value to shareholders.

View our latest analysis for Axalta Coating Systems

How Quickly Is Axalta Coating Systems Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Axalta Coating Systems has grown EPS by 33% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. The music to the ears of Axalta Coating Systems shareholders is that EBIT margins have grown from 9.2% to 12% in the last 12 months and revenues are on an upwards trend as well. 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. For finer detail, click on the image.

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 Axalta Coating Systems.

Are Axalta Coating Systems 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. 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.

Even though some insiders sold down their holdings, their actions speak louder than words with US$731k more invested than sold by people who know they company best. 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 Kevin Stein for US$1.0m worth of shares, at about US$27.38 per share.

The good news, alongside the insider buying, for Axalta Coating Systems bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$28m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Axalta Coating Systems Worth Keeping An Eye On?

For growth investors, Axalta Coating Systems' 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. Astute investors will want to keep this stock on watch. It is worth noting though that we have found 1 warning sign for Axalta Coating Systems that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Axalta Coating Systems isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by recent insider buying.

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.