In This Article:
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in AXIS Capital Holdings (NYSE:AXS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide AXIS Capital Holdings with the means to add long-term value to shareholders.
How Fast Is AXIS Capital Holdings Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Impressively, AXIS Capital Holdings has grown EPS by 23% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. AXIS Capital Holdings shareholders can take confidence from the fact that EBIT margins are up from 9.8% to 18%, 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. For finer detail, click on the image.
View our latest analysis for AXIS Capital Holdings
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of AXIS Capital Holdings' forecast profits?
Are AXIS Capital Holdings Insiders Aligned With All Shareholders?
Since AXIS Capital Holdings has a market capitalisation of US$7.9b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Holding US$69m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like AXIS Capital Holdings with market caps between US$4.0b and US$12b is about US$8.1m.