Yahoo Finance Do Aurelia Metals's (ASX:AMI) Earnings Warrant Your Attention?
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Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like Aurelia Metals (ASX:AMI). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
See our latest analysis for Aurelia Metals
How Fast Is Aurelia Metals Growing Its Earnings Per Share?
Over the last three years, Aurelia Metals has grown earnings per share (EPS) like bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Aurelia Metals's EPS soared from AU$0.077 to AU$0.13, in just one year. That's a impressive gain of 64%.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Aurelia Metals shareholders can take confidence from the fact that EBIT margins are up from 33% to 37%, and revenue is growing. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Aurelia Metals's future profits.
Are Aurelia Metals Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.
Not only did Aurelia Metals insiders refrain from selling stock during the year, but they also spent AU$190k buying it. That's nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by Non-Executive Director Paul Espie for AU$110k worth of shares, at about AU$0.74 per share.
It's me that Aurelia Metals insiders are buying the stock, but that's not the only reason to think leader are fair to shareholders. I refer to the very reasonable level of CEO pay. For companies with market capitalizations between AU$286m and AU$1.1b, like Aurelia Metals, the median CEO pay is around AU$1.0m.
The CEO of Aurelia Metals only received AU$110k in total compensation for the year ending June 2018. That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Does Aurelia Metals Deserve A Spot On Your Watchlist?
For growth investors like me, Aurelia Metals's raw rate of earnings growth is a beacon in the night. And that's not the only positive, either. We have both insider buying and reasonable and remuneration to consider. The message I'd take from this quick rundown is that, yes, this stock is worth investigating further. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Aurelia Metals's ROE with industry peers (and the market at large).
As a growth investor I do like to see insider buying. But Aurelia Metals isn't the only one. You can see a a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
