Yahoo Finance If You Like EPS Growth Then Check Out Aon (NYSE:AON) Before It's Too Late
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Aon (NYSE:AON). 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 Aon
How Fast Is Aon 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). That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Aon's EPS has grown 33% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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). Aon reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Aon's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Aon Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We did see some selling in the last twelve months, but that's insignificant compared to the whopping US$14m that the Independent Non-Executive Chairman of the Board, Lester Knight spent acquiring shares. The average price paid was about US$195. The quantum of that insider purchase is both rare and a sight to behold, not unlike an endangered Amur Leopard in the wild.
The good news, alongside the insider buying, for Aon bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enormous stake in the company, worth US$491m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add Aon To Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Aon's strong EPS growth. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So it's fair to say I think this stock may well deserve a spot on your watchlist. What about risks? Every company has them, and we've spotted 1 warning sign for Aon you should know about.
The good news is that Aon is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
This article by Simply Wall St is general in nature. 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.
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