Yahoo Finance We Ran A Stock Scan For Earnings Growth And AJ Bell (LON:AJB) Passed With Ease
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
In contrast to all that, many investors prefer to focus on companies like AJ Bell (LON:AJB), which has not only revenues, but also profits. 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.
Check out our latest analysis for AJ Bell
How Quickly Is AJ Bell Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Impressively, AJ Bell 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.
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. EBIT margins for AJ Bell remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 33% to UK£217m. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of AJ Bell's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are AJ Bell Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own AJ Bell shares worth a considerable sum. Notably, they have an enviable stake in the company, worth UK£304m. That equates to 22% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like AJ Bell with market caps between UK£800m and UK£2.6b is about UK£1.9m.
AJ Bell's CEO took home a total compensation package worth UK£941k in the year leading up to September 2023. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add AJ Bell To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into AJ Bell's strong EPS growth. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. Everyone has their own preferences when it comes to investing but it definitely makes AJ Bell look rather interesting indeed. What about risks? Every company has them, and we've spotted 1 warning sign for AJ Bell you should know about.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in GB with promising growth potential and insider confidence.
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.
