Yahoo Finance Should You Be Adding VAALCO Energy (NYSE:EGY) To Your Watchlist Today?
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like VAALCO Energy (NYSE:EGY). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for VAALCO Energy
How Fast Is VAALCO Energy Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that VAALCO Energy has managed to grow EPS by 34% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. On the one hand, VAALCO Energy's EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
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 VAALCO Energy?
Are VAALCO Energy 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, small purchases are not always indicative of conviction, and insiders don't always get it right.
Despite some VAALCO Energy insiders disposing of some shares, we note that there was US$149k more in buying interest among those who know the company best Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. Zooming in, we can see that the biggest insider purchase was by CEO & Director George Maxwell for US$37k worth of shares, at about US$3.70 per share.
Recent insider purchases of VAALCO Energy stock is not the only way management has kept the interests of the general public shareholders in mind. Namely, VAALCO Energy has a very reasonable level of CEO pay. For companies with market capitalisations between US$400m and US$1.6b, like VAALCO Energy, the median CEO pay is around US$3.4m.
VAALCO Energy's CEO took home a total compensation package worth US$2.0m in the year leading up to December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Does VAALCO Energy Deserve A Spot On Your Watchlist?
You can't deny that VAALCO Energy has grown its earnings per share at a very impressive rate. That's attractive. To add to the positives, VAALCO Energy has recorded instances of insider buying and a modest executive pay to boot. The overriding message from this quick rundown is yes, this stock is worth investigating further. It is worth noting though that we have found 1 warning sign for VAALCO Energy that you need to take into consideration.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of VAALCO Energy, you'll probably love this curated collection of companies in the US that have witnessed growth alongside 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.
