For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it completely lacks a track record of revenue and earnings. And in their study titled Who falls prey to the wolf of Wall Street? » Leuz and. al. found that it is “fairly common” for investors to lose money by buying into “pump and dump” schemes.
If, on the other hand, you like businesses that generate revenue and even profit, then you might be interested in AGCO (NYSE: AGCO). Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when pressed.
Check out our latest analysis for AGCO
How fast is AGCO growing its earnings per share?
If a company can keep increasing its earnings per share (EPS) long enough, its stock price will eventually follow. Therefore, there are many investors who like to buy shares in companies that grow EPS. Who among us wouldn’t applaud AGCO’s stratospheric annual EPS growth of 51%, compounded, over the past three years? This kind of growth never lasts long, but like a shooting star, it’s worth watching when it happens.
One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. The good news is that AGCO is increasing its revenue and EBIT margins have improved by 2.4 percentage points to 8.7% compared to last year. It’s great to see, on both counts.
In the table below, you can see how the company has increased its profits and revenue over time. To see the actual numbers, click on the chart.
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 AGCO.
Are AGCO insiders aligned with all shareholders?
Given that AGCO has a market capitalization of US$8.6 billion, we wouldn’t expect insiders to hold a high percentage of shares. 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$108 million. This suggests to me that management will be very mindful of shareholder interests when making decisions!
It’s good to see that insiders are invested in the company, but are the compensation levels reasonable? Well, based on the CEO’s salary, I’d say they are indeed. I found that the median total compensation for CEOs of companies like AGCO with a market capitalization between $4.0 billion and $12 billion is around $6.5 million.
AGCO offered total compensation worth US$4.5 million to its CEO during the year at . This is below average for companies of a similar size and seems pretty reasonable to me. Although the level of CEO compensation is not a determining factor in my view of the company, modest compensation is positive, as it suggests that the board has the interests of shareholders in mind. I would also say that reasonable levels of compensation attest to good decision-making more generally.
Should you add AGCO to your watch list?
AGCO’s earnings per share took off like a rocket aimed straight at the moon. The icing on the cake is that insiders own a bunch of stock, and the CEO salary really seems quite reasonable. The strong improvement in EPS suggests businesses are doing well. AGCO certainly ticks a few of my boxes, so I think it’s probably worth looking into further. Once you’ve identified a business you like, the next step is to figure out what you think it’s worth. And right now is your chance to see our exclusive discounted cash flow assessment of AGCO. You might benefit from taking a look today.
You can invest in the company of your choice. But if you’d rather focus on stocks that have been insider buying, here’s a list of companies that have been insider buying over the past three months.
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.
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