Should You Be Adding Amphenol (NYSE:APH) To Your Watchlist Today?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 Amphenol (NYSE:APH), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Amphenol with the means to add long-term value to shareholders.

See our latest analysis for Amphenol

How Fast Is Amphenol Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Amphenol managed to grow EPS by 14% 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. While we note Amphenol achieved similar EBIT margins to last year, revenue grew by a solid 6.6% to US$13b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

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

Are Amphenol 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

One gleaming positive for Amphenol, in the last year, is that a certain insider has buying shares with ample enthusiasm. Indeed, Independent Director Robert Livingston has accumulated shares over the last year, paying a total of US$1.0m at an average price of about US$42.41. Big insider buys like that are a rarity and should prompt discussion on the merits of the business.

The good news, alongside the insider buying, for Amphenol bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth US$478m. We note that this amounts to 0.6% of the company, which may be small owing to the sheer size of Amphenol but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Amphenol's CEO, Richard Norwitt, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Amphenol, with market caps over US$8.0b, is about US$13m.

The Amphenol CEO received US$11m in compensation for the year ending December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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. It can also be a sign of a culture of integrity, in a broader sense.

Does Amphenol Deserve A Spot On Your Watchlist?

One positive for Amphenol is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Amphenol that you should be aware of.

The good news is that Amphenol 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.

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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.