Does the Federal Farm Mortgage (NYSE: AGM) deserve a spot on your watch list?
Like a puppy chasing its tail, some new investors often pursue âthe next big thing,â even if that means buying âhistory stocksâ with no income, let alone profit. Unfortunately, high-risk investments are often unlikely to pay off, and many investors pay a price to learn their lesson.
So if you’re like me, you might be more interested in profitable and growing businesses like Federal agricultural mortgage (NYSE: AGA). While profit isn’t necessarily social good, it’s easy to admire a business that can consistently produce it. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when in a hurry.
Check out our latest analysis for the federal farm mortgage
How fast is the federal farm mortgage growing?
As one of my mentors once told me, the stock price tracks earnings per share (EPS). This means that growing EPS is seen as a real benefit by most successful long-term investors. Federal Agricultural Mortgage has managed to increase EPS by 6.0% per year, over three years. It might not be particularly high growth, but it shows that earnings per share are steadily moving in the right direction.
I like to look at earnings before interest and tax margins (EBIT), as well as revenue growth, to get another idea of ââhow well the business is growing. Not all Federal Agricultural Mortgage revenue this year is revenue operationsSo keep in mind that the revenue and margin numbers I used might not be the best representation of the underlying business. Federal Agricultural Mortgage has maintained stable EBIT margins over the past year, while increasing revenues 25% to US $ 224 million. It’s really positive.
You can check out the revenue and profit growth trend of the company in the chart below. To see the actual numbers, click on the graph.
While profitability is the driving force behind the upswing, cautious investors are also always checking the balance sheet.
Are Federal Farm Mortgage Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains come, insider buying fills me with optimistic anticipation. This is because insider buying often indicates that those closest to the company are confident that the stock price will perform well. However, insiders sometimes get it wrong, and we don’t know the exact reasoning behind their acquisitions.
Insider sales of Federal Agricultural Mortgage shares have been insignificant compared to a single buyer in the past twelve months. Specifically, the independent director, James Engebretsen, spent US $ 507,000, paying approximately US $ 101 per share. For me, that’s probably a sign of conviction.
The good news, along with insider buying, for Federal Agricultural Mortgage bulls is that insiders (collectively) have a significant investment in the stock. Indeed, they hold 21 million US dollars of its shares. That’s a lot of money, and that’s no small incentive to work hard. Although he only represents 1.7% of the business, the value of this investment is enough to show that insiders have a lot going on in the business.
While insiders are apparently happy to own and accumulate stock, that is only part of the pretty picture. The icing on the cake is that CEO Brad Nordholm is paid relatively modestly to CEOs of companies of similar size. For companies with a market capitalization between $ 1.0 billion and $ 3.2 billion, like Federal Agricultural Mortgage, the median CEO salary is around $ 3.7 million.
Federal Agricultural Mortgage offered total compensation worth $ 2.7 million to its CEO during the year to. Sounds reasonable enough, especially considering it is below the median for companies of similar size. CEO compensation isn’t the most important aspect of a business to consider, but when it’s reasonable, it gives me a little more confidence that executives are looking out for the interests of shareholders. It can also be a sign of a culture of integrity, in the broad sense.
Does the federal farm mortgage deserve a spot on your watch list?
One positive point for Federal Agricultural Mortgage is that it increases BPA. It’s nice to see. On top of that, we’ve seen insiders buy stocks even if they already have a lot. This makes the company a prime candidate for my watchlist – and arguably a research priority. While we’ve looked at the quality of the earnings, we haven’t done any work to assess the stock yet. So if you like to buy low, you might want to check whether Federal Agricultural Mortgage is trading high P / E or low P / E, relative to its industry.
The good news is that Federal Agricultural Mortgage isn’t the only growth stock with insider buying. Here is a list of them … with insider buys over the past three months!
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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