Canada Markets closed
  • S&P/TSX

    20,758.34
    +17.90 (+0.09%)
     
  • S&P 500

    4,136.48
    -43.28 (-1.04%)
     
  • DOW

    33,926.01
    -127.93 (-0.38%)
     
  • CAD/USD

    0.7467
    -0.0043 (-0.58%)
     
  • CRUDE OIL

    73.23
    -2.65 (-3.49%)
     
  • BTC-CAD

    31,327.29
    -412.21 (-1.30%)
     
  • CMC Crypto 200

    535.42
    -1.43 (-0.27%)
     
  • GOLD FUTURES

    1,877.70
    -53.10 (-2.75%)
     
  • RUSSELL 2000

    1,985.53
    -15.69 (-0.78%)
     
  • 10-Yr Bond

    3.5320
    +0.1360 (+4.00%)
     
  • NASDAQ

    12,006.96
    -193.86 (-1.59%)
     
  • VOLATILITY

    18.33
    -0.40 (-2.14%)
     
  • FTSE

    7,901.80
    +81.64 (+1.04%)
     
  • NIKKEI 225

    27,509.46
    +107.41 (+0.39%)
     
  • CAD/EUR

    0.6913
    +0.0031 (+0.45%)
     

Do AECOM's (NYSE:ACM) Earnings Warrant Your Attention?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 AECOM (NYSE:ACM). 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.

View our latest analysis for AECOM

AECOM's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that AECOM's EPS has grown 28% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. It seems AECOM is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.

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.

earnings-and-revenue-history
earnings-and-revenue-history

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for AECOM's future profits.

Are AECOM Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$12b company like AECOM. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$44m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.4%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

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. For companies with market capitalisations over US$8.0b, like AECOM, the median CEO pay is around US$13m.

The AECOM CEO received US$6.5m in compensation for the year ending September 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is AECOM Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into AECOM's strong EPS growth. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. The overarching message here is that AECOM has underlying strengths that make it worth a look at. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of AECOM. You might benefit from giving it a glance today.

Although AECOM certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here