Here's Why We Think Avista (NYSE:AVA) Is Well Worth Watching

By
Simply Wall St
Published
May 21, 2021
NYSE:AVA
Source: Shutterstock

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 completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Avista (NYSE:AVA). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Avista

How Quickly Is Avista Increasing Earnings Per Share?

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). That makes EPS growth an attractive quality for any company. Avista managed to grow EPS by 9.1% per year, over three years. That's a good rate of growth, if it can be sustained.

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 revenue is looking a bit flat, the good news is EBIT margins improved by 2.1 percentage points to 18%, in the last twelve months. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NYSE:AVA Earnings and Revenue History May 22nd 2021

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Avista EPS 100% free.

Are Avista 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. As a result, I'm encouraged by the fact that insiders own Avista shares worth a considerable sum. To be specific, they have US$31m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 1.0% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Avista Worth Keeping An Eye On?

One positive for Avista is that it is growing EPS. That's nice to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Before you take the next step you should know about the 3 warning signs for Avista (1 can't be ignored!) that we have uncovered.

Although Avista certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

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