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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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like AMETEK (NYSE:AME). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide AMETEK with the means to add long-term value to shareholders.
View our latest analysis for AMETEK
How Fast Is AMETEK Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Over the last three years, AMETEK has grown EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. AMETEK maintained stable EBIT margins over the last year, all while growing revenue 8.5% to US$6.4b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of AMETEK's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are AMETEK Insiders Aligned With All Shareholders?
Owing to the size of AMETEK, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. We note that their impressive stake in the company is worth US$176m. We note that this amounts to 0.5% of the company, which may be small owing to the sheer size of AMETEK but it's still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.
Should You Add AMETEK To Your Watchlist?
One important encouraging feature of AMETEK is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. Of course, just because AMETEK is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.