With EPS Growth And More, Anglo American (LON:AAL) is interesting
Some have more money than sense, they say, so even companies with no revenue, no profit and a history of failures can easily find investors. But the reality is that when a company loses money every year, for long enough, its investors will usually take their share of those losses.
So if you’re like me, you might be more interested in profitable and growing companies, like Anglo-American (LON:AAL). Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. Loss-making businesses are always in a race against time to achieve financial viability, but time is often the friend of a profitable business, especially if it is growing.
See our latest analysis for Anglo American
How fast is Anglo American growing?
As one of my mentors once told me, stock price follows earnings per share (EPS). This means EPS growth is seen as a real benefit by most successful long-term investors. Impressively, Anglo American has grown EPS by 36% pa, compounded, over the past three years. If the company can sustain this type of growth, we expect shareholders to come out on top.
I like to see revenue growth as an indication that growth is sustainable, and I look for a high margin on earnings before interest and taxes (EBIT) to point to a competitive moat (although some low-margin companies also have moats). The good news is that Anglo American is increasing its revenue and EBIT margins have improved by 15.4 percentage points to 41% compared to last year. Checking those two boxes is a good sign of growth, in my book.
In the table below, you can see how the company has increased its profits and revenue over time. Click on the table to see the exact numbers.
Of course, the trick is to find stocks that have their best days in the future, not in the past. You can of course base your opinion on past performance, but you can also check out this interactive chart of professional analyst EPS forecasts for Anglo American.
Are Anglo American insiders aligned with all shareholders?
We wouldn’t expect to see insiders owning a large percentage of a £43bn UK company like Anglo American. But we are reassured by the fact that they have invested in the company. Indeed, they have invested a mountain of glittering wealth in it, currently valued at US$143 million. This suggests to me that management will be very mindful of shareholder interests when making decisions!
Does Anglo American deserve to be watched?
Given that I believe share price tracks earnings per share, you can easily imagine how I feel about Anglo American’s strong EPS growth. Additionally, the high level of insider ownership impresses me and suggests that I am not the only one enjoying EPS growth. So this is most likely the kind of business I like to spend time researching, in order to discern its true worth. What about the risks? Every business has them, and we’ve spotted 2 warning signs for Anglo American (of which 1 does not suit us too much!) that you should know.
Of course, you can (sometimes) buy stocks that are not increased income and do not have insiders buying stocks. But as a growth investor, I always like to check out companies that To do have these characteristics. You can access a free list of them here.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.