Is Now The Time To Put Acsion (JSE:ACS) On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Acsion (JSE:ACS). 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 Acsion
How Fast Is Acsion Growing Its Earnings Per Share?
Acsion has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. It's good to see that Acsion's EPS has grown from R2.31 to R2.70 over twelve months. There's little doubt shareholders would be happy with that 17% gain.
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. Our analysis has highlighted that Acsion's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While Acsion did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Acsion isn't a huge company, given its market capitalisation of R2.2b. That makes it extra important to check on its balance sheet strength.
Are Acsion Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. 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 Acsion insiders reported share sales in the last twelve months. But the important part is that CEO & Executive Director Kiriakos Anastasiadis spent R9.6m buying stock, at an average price of R5.60. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.
Recent insider purchases of Acsion stock is not the only way management has kept the interests of the general public shareholders in mind. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations under R3.6b, like Acsion, the median CEO pay is around R6.4m.
Acsion's CEO took home a total compensation package of R2.9m in the year prior to February 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Does Acsion Deserve A Spot On Your Watchlist?
One important encouraging feature of Acsion is that it is growing profits. And there's more to Acsion, with the insider buying and modest CEO pay being a great look for those with an eye on the company. If these factors aren't enough to secure Acsion a spot on the watchlist, then it certainly warrants a closer look at the very least. Before you take the next step you should know about the 3 warning signs for Acsion (1 makes us a bit uncomfortable!) that we have uncovered.
The good news is that Acsion is not the only stock with insider buying. Here's a list of small cap, undervalued companies in ZA with insider buying in the last three months!
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com