Here’s why ACI Worldwide (NASDAQ: ACIW) has caught investors’ attention

It is common for many investors, especially those who are inexperienced, to buy stocks of companies with a good history, even if those companies are loss-making. Sometimes these stories can cloud investors’ minds, leading them to invest with their emotions rather than based on the company’s sound fundamentals. A loss-making company has not yet proven itself in terms of profits and, eventually, the inflow of external capital may dry up.

If this type of business is not your style, you like businesses that generate revenue, and even make a profit, then you may well be interested in ACI around the world (NASDAQ:ACIW). While this doesn’t necessarily mean the company is undervalued, the company’s profitability is enough to warrant some appreciation – especially if it’s growing.

Check out our latest analysis for ACI Worldwide

ACI Worldwide’s earnings per share are growing

The market is a voting machine in the short term, but a weighing machine in the long term, so we can expect the stock price to eventually follow earnings per share (EPS) results. This makes EPS growth an attractive quality for any business. It’s certainly nice to see that ACI Worldwide managed to grow its EPS by 19% per year over three years. Generally, we would say that if a company can keep up that a kind of growth, shareholders will be beaming.

One way to check a company’s growth is to look at how its revenue and earnings before interest and tax (EBIT) margins are changing. The good news is that ACI Worldwide is growing its revenue and its EBIT margins improved by 6.1 percentage points to 19% over the last year. That’s great to see, on both counts.

In the chart below, you can see how the company has grown its profits and revenue over time. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are go to There’s no such thing as a crystal ball, but you can check out our free visualization of analyst consensus forecasts for ACI Worldwide’s future EPS.

Are ACI Worldwide insiders aligned with all shareholders?

It’s nice to see company executives putting their money on the line, so to speak, because it improves the incentive alignment between the people running the company and its true owners. Shareholders will be pleased that insiders own a considerable amount of ACI Worldwide stock. In fact, they own $38 million of its shares. This sizable investment should help generate long-term value for the company. Even though their stake is only 0.9%, there’s still a lot at stake to encourage the company to stick to a strategy that will deliver value to shareholders.

It’s good to see insiders investing in the company, but are the compensation levels reasonable? A brief analysis of CEO compensation suggests that this is the case. The median total compensation for CEOs at companies of similar size to ACI Worldwide, with market capitalizations between US$2.0b and US$6.4b, is about US$6.7m.

The CEO of ACI Worldwide received compensation of $5.2 million for the year ending December 2023. This figure is lower than the average for companies of similar size and seems quite reasonable. CEO compensation isn’t really the most important aspect of a company to consider, but when it’s reasonable, it provides a little more confidence that executives are looking out for shareholders’ interests. In general, it can be argued that reasonable compensation levels demonstrate good decision-making.

Should you add ACI Worldwide to your watchlist?

For growth investors, ACI Worldwide’s raw earnings growth rate is a beacon in the night. If you still have doubts, also remember that the company’s internals have a considerable investment in aligning with shareholders, and that CEO compensation is quite modest compared to similarly sized companies. The overarching message here is that ACI Worldwide has underlying strengths that are worth looking at. However, be aware that ACI Worldwide has 2 warning signs in our investment analysis you should know about…

It is still possible to be successful by buying stocks that are not profit growth and not have insiders buying shares. But for those who consider these metrics important, we encourage you to check out companies that TO DO have these characteristics. You can access a personalized list of companies that have demonstrated growth supported by significant internal ownership.

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

Do you have any comments on this article? Are you concerned about its content? Get in touch with us directly. You can also email the editorial team (at) simplywallst.com.

This Simply Wall St article 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 constitute financial advice. It is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. Our goal is to bring you targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any stocks mentioned.

Do you have any comments on this article? Are you concerned about its content? Contact us directly. You can also email [email protected]