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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 Assured Guaranty (NYSE:AGO). 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.
Check out our latest analysis for Assured Guaranty
How Fast Is Assured Guaranty Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Assured Guaranty's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 59%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Assured Guaranty's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Unfortunately, Assured Guaranty's revenue dropped 7.1% last year, but the silver lining is that EBIT margins improved from 25% to 61%. While not disastrous, these figures could be better.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Assured Guaranty's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Assured Guaranty Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Assured Guaranty shares worth a considerable sum. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$233m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.