With EPS Growth And More, Air Transport Services Group (NASDAQ:ATSG) presents an interesting case

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 currently lacks a track record of revenue and earnings. But as Peter Lynch said in One Up on Wall Street, “Long shots almost never pay off.” A loss-making company has not yet proven itself with profits, and eventually the inflow of external capital may dry up.

Despite being in the age of astronomical investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like Air Transport Services Group (NASDAQ: ATSG). This does not mean that the company presents the best investment opportunity, but profitability is a key element of business success.

How fast is the Air Transport Services group increasing its earnings per share?

Over the past three years, Air Transport Services Group’s earnings per share have taken off; so much so that it’s a bit dishonest to use these numbers to try to derive long-term estimates. It therefore makes sense to focus on the most recent growth rates instead. Air Transport Services Group EPS increased from US$1.93 to US$2.85; a result that will not fail to satisfy the shareholders. That’s a fantastic 48% gain.

Revenue growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and tax (EBIT) margin, it’s a great way for a business to maintain a competitive edge in the market. Shareholders of Air Transport Services Group can be reassured by the fact that EBIT margins have increased from 12% to 15% and that turnover is growing. Checking both of these boxes is a good sign of growth, in our book.

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.

NasdaqGS: ATSG Earnings and Revenue History September 5, 2022

As we live in the moment, there is no doubt that the future matters most in the investment decision process. So why not check out this interactive chart illustrating future EPS estimates for Air Transport Services Group?

Are Air Transport Services Group Insiders Aligned with All Shareholders?

Investors are always looking for a vote of confidence in the companies they own and insider buying is one of the main indicators of optimism in the market. Because often buying stocks is a sign that the buyer considers them undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Despite sales worth US$550,000, Air Transport Services Group insiders have been buying shares massively, spending US$1.1 million on purchases over the past twelve months. One could argue that the level of purchase implies genuine trust in the company. We also note that it was company insider David Soaper who made the biggest acquisition, paying US$998,000 for shares at around US$24.97 each.

The good news, alongside insider buying, for the bulls in the airline services group is that insiders (collectively) have a significant investment in the stock. Owning $52 million of stock in the company is no laughing matter, and insiders will be committed to delivering the best results for shareholders. That’s certainly enough to let shareholders know that management will be very focused on long-term growth.

While insiders already own a significant number of shares and are buying more, the good news for common stockholders doesn’t end there. The icing on the cake is that CEO Rich Corrado is paid relatively modestly to CEOs of similarly sized companies. For companies with a market capitalization between $1.0 billion and $3.2 billion, such as Air Transport Services Group, the median CEO salary is around $5.5 million.

The CEO of Air Transport Services Group earned a total compensation of US$2.6 million in the year to December 2021. This is clearly well below average, so at a glance, this arrangement appears generous to shareholders and indicates a modest compensation culture. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives a little more confidence that executives are looking out for shareholders’ interests. It can also be a sign of a culture of integrity, broadly defined.

Is the airline services group worth watching?

If you think stock price tracks earnings per share, you should definitely dig into Air Transport Services Group’s strong EPS growth. Additionally, company insiders have added to their significant stake in the company. These things considered, this is a stock worth watching. Remember that there can always be risks. For example, we have identified 1 warning sign for Air Transport Services Group of which you should be aware.

The good news is that Air Transport Services Group isn’t the only growth stock to buy insiders. Here’s a list…with insider purchases 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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