Yahoo Finance Is Now The Time To Put Airtel Africa (LON:AAF) On Your Watchlist?
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 currently lacks a track record of revenue and 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Airtel Africa (LON:AAF). 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 Airtel Africa
How Quickly Is Airtel Africa Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Airtel Africa has grown EPS by 20% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Airtel Africa maintained stable EBIT margins over the last year, all while growing revenue 13% to US$5.1b. That's progress.
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 Airtel Africa's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Airtel Africa Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The first bit of good news is that no Airtel Africa insiders reported share sales in the last twelve months. Even better, though, is that the Independent Non-Executive Director, John Danilovich, bought a whopping US$198k worth of shares, paying about US$1.32 per share, on average. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.
It's commendable to see that insiders have been buying shares in Airtel Africa, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. The median total compensation for CEOs of companies similar in size to Airtel Africa, with market caps between US$4.0b and US$12b, is around US$3.2m.
Airtel Africa's CEO took home a total compensation package worth US$1.9m in the year leading up to March 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Does Airtel Africa Deserve A Spot On Your Watchlist?
For growth investors, Airtel Africa's raw rate of earnings growth is a beacon in the night. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. The overriding message from this quick rundown is yes, this stock is worth investigating further. Still, you should learn about the 2 warning signs we've spotted with Airtel Africa.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Airtel Africa, you'll probably love this free list of growing companies that insiders are buying.
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.
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