Should You Be Adding Advanced Energy Industries (NASDAQ:AEIS) To Your Watchlist Today?

By
Simply Wall St
Published
November 13, 2021
NasdaqGS:AEIS
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Advanced Energy Industries (NASDAQ:AEIS). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Advanced Energy Industries

How Quickly Is Advanced Energy Industries Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Advanced Energy Industries managed to grow EPS by 12% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. Advanced Energy Industries maintained stable EBIT margins over the last year, all while growing revenue 3.4% to US$1.4b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
NasdaqGS:AEIS Earnings and Revenue History November 14th 2021

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Advanced Energy Industries's forecast profits?

Are Advanced Energy Industries Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Even though there was some insider selling over the last year, that was outweighed by President Stephen Kelley's huge outlay of US$999k, spent buying shares. We should note the average purchase price was around US$85.43. Big purchases like that are well worth noting, especially for those who like to follow the insider money.

Along with the insider buying, another encouraging sign for Advanced Energy Industries is that insiders, as a group, have a considerable shareholding. To be specific, they have US$44m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Advanced Energy Industries Worth Keeping An Eye On?

One important encouraging feature of Advanced Energy Industries is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Advanced Energy Industries that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Advanced Energy Industries, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.