Yahoo Finance Here's Why We Think AstraZeneca (LON:AZN) Is Well Worth Watching
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in AstraZeneca (LON:AZN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide AstraZeneca with the means to add long-term value to shareholders.
Check out our latest analysis for AstraZeneca
How Quickly Is AstraZeneca Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. AstraZeneca managed to grow EPS by 10% per year, over three years. That's a good rate of growth, if it can be sustained.
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. While we note AstraZeneca achieved similar EBIT margins to last year, revenue grew by a solid 8.6% to US$48b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, 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 AstraZeneca?
Are AstraZeneca Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The first bit of good news is that no AstraZeneca insiders reported share sales in the last twelve months. Even better, though, is that the Independent Chairman, Michel Demare, bought a whopping US$203k worth of shares, paying about US$102 per share, on average. Big buys like that may signal an opportunity; actions speak louder than words.
Along with the insider buying, another encouraging sign for AstraZeneca is that insiders, as a group, have a considerable shareholding. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$90m. We note that this amounts to 0.05% of the company, which may be small owing to the sheer size of AstraZeneca but it's still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.
Is AstraZeneca Worth Keeping An Eye On?
As previously touched on, AstraZeneca is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. However, before you get too excited we've discovered 2 warning signs for AstraZeneca that you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of AstraZeneca, you'll probably love this curated collection of companies in GB that have an attractive valuation 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.
