Here's Why I Think Ameriprise Financial (NYSE:AMP) Might Deserve Your Attention Today
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like Ameriprise Financial (NYSE:AMP), which has not only revenues, but also profits. Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for Ameriprise Financial
How Fast Is Ameriprise Financial Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Ameriprise Financial has managed to grow EPS by 30% per year over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be smiling.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Ameriprise Financial’s revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I’ve used might not be the best representation of the underlying business. Ameriprise Financial’s EBIT margins have actually improved by 4.2 percentage points in the last year, to reach 30%, but, on the flip side, revenue was down 5.8%. That falls short of ideal.
In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.
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 Ameriprise Financial’s future profits.
Are Ameriprise Financial Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$21b company like Ameriprise Financial. But we do take comfort from the fact that they are investors in the company. With a whopping US$71m worth of shares as a group, insiders have plenty riding on the company’s success. This should keep them focused on creating long term value for shareholders.
Is Ameriprise Financial Worth Keeping An Eye On?
For growth investors like me, Ameriprise Financial’s raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn’t surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. However, before you get too excited we’ve discovered 3 warning signs for Ameriprise Financial (1 is potentially serious!) that you should be aware of.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
This article by Simply Wall St is general in nature. 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.
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