With EPS Growth And More, Air Transport Services Group (NASDAQ:ATSG) Makes An Interesting Case

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Air Transport Services Group (NASDAQ:ATSG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Air Transport Services Group with the means to add long-term value to shareholders.

Check out our latest analysis for Air Transport Services Group

Air Transport Services Group's Improving Profits

Air Transport Services Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Air Transport Services Group's EPS soared from US$1.93 to US$2.85, over the last year. That's a fantastic gain of 48%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The music to the ears of Air Transport Services Group shareholders is that EBIT margins have grown from 12% to 15% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Air Transport Services Group?

Are Air Transport Services Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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$599k more invested than sold by people who know they company best. This overall confidence in the company at current the valuation signals their optimism. We also note that it was the company insider, David Soaper, who made the biggest single acquisition, paying US$998k for shares at about US$24.97 each.

Along with the insider buying, another encouraging sign for Air Transport Services Group is that insiders, as a group, have a considerable shareholding. To be specific, they have US$47m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 2.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Rich Corrado is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Air Transport Services Group with market caps between US$1.0b and US$3.2b is about US$5.5m.

The Air Transport Services Group CEO received total compensation of just US$2.6m in the year to December 2021. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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.

Should You Add Air Transport Services Group To Your Watchlist?

You can't deny that Air Transport Services Group has grown its earnings per share at a very impressive rate. That's attractive. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. We should say that we've discovered 1 warning sign for Air Transport Services Group that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Air Transport Services Group, 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.

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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.