Stock Analysis

Here's Why We Think AngloGold Ashanti (JSE:ANG) Is Well Worth Watching

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JSE:ANG
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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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in AngloGold Ashanti (JSE:ANG). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for AngloGold Ashanti

How Fast Is AngloGold Ashanti Growing Its Earnings Per Share?

In the last three years AngloGold Ashanti's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, AngloGold Ashanti's EPS shot from US$0.87 to US$2.26, over the last year. You don't see 159% year-on-year growth like that, very often. That could be a sign that the business has reached a true inflection point.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that AngloGold Ashanti is growing revenues, and EBIT margins improved by 15.2 percentage points to 32%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

earnings-and-revenue-history
JSE:ANG Earnings and Revenue History April 14th 2021

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for AngloGold Ashanti.

Are AngloGold Ashanti Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a R130b company like AngloGold Ashanti. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$176m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add AngloGold Ashanti To Your Watchlist?

AngloGold Ashanti's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering AngloGold Ashanti for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for AngloGold Ashanti that you need to be mindful of.

Although AngloGold Ashanti 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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