Stock Analysis

I Built A List Of Growing Companies And Artesian Resources (NASDAQ:ARTN.A) Made The Cut

  •  Updated
NasdaqGS:ARTN.A
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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Artesian Resources (NASDAQ:ARTN.A). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Artesian Resources

Artesian Resources's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Artesian Resources managed to grow EPS by 8.3% per year, over three years. That's a pretty good rate, if the company can sustain it.

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 good news is that Artesian Resources is growing revenues, and EBIT margins improved by 2.5 percentage points to 32%, over the last year. That's great to see, on both counts.

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:ARTN.A Earnings and Revenue History February 18th 2021

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Artesian Resources's balance sheet strength, before getting too excited.

Are Artesian Resources Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Artesian Resources insiders have a significant amount of capital invested in the stock. To be specific, they have US$39m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 11% of the company; visible skin in the game.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Artesian Resources with market caps between US$200m and US$800m is about US$1.5m.

Artesian Resources offered total compensation worth US$983k to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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 Artesian Resources Deserve A Spot On Your Watchlist?

One important encouraging feature of Artesian Resources is that it is growing profits. Earnings growth might be the main game for Artesian Resources, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. You still need to take note of risks, for example - Artesian Resources has 1 warning sign we think you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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

If you’re looking to trade Artesian Resources, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether Artesian Resources is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis