Here’s Why AAON (NASDAQ:AAON) Has Grabbed Investors’ Attention

The excitement of investing in a company that can turn its fortunes around is a major draw for some speculators. Thus, even companies that have no revenue or profit and a history of failures manage to find investors. Sometimes, these stories can confuse investors, leading them to invest based on their emotions rather than on the company’s good fundamentals. A loss-making company has not yet proven itself in terms of profits, and eventually the inflow of outside capital may dry up.

Although we are in the era of high-risk investing in technology stocks, many investors still adopt a more traditional strategy: buying shares in profitable companies like AAON (NASDAQ:AAON). Even though this company is fairly valued by the market, investors will agree that generating consistent profits will continue to provide AAON with the means to add long-term value to shareholders.

Check out our latest analysis for AAON

AAON’s earnings per share are growing

If a company can sustain earnings per share (EPS) growth for long enough, its share price should eventually follow. This makes EPS growth an attractive quality for any company. Impressively, AAON has grown its EPS by 33% per year, compounded, over the last three years. As a general rule of thumb, we would say that if a company can keep up that some kind of growth, shareholders will be delighted.

Revenue growth is a good indicator of the sustainability of growth and, combined with a high EBIT (earnings before interest and tax) margin, is a great way for a company to maintain a competitive edge in the market. AAON shareholders can take comfort in the fact that EBIT margins have increased from 15% to 21% and revenue is growing. Ticking both of these boxes is, in our view, a good sign of growth.

The chart below shows how the company’s financial results and revenue have changed over time. To see the actual numbers, click on the chart.

You don’t drive with your eyes in the rearview mirror, so this might interest you more. free report showing analysts’ forecasts for AAON future benefits.

Are AAON insiders aligned with all shareholders?

We wouldn’t expect to see insiders owning a significant percentage of a $7.0 billion company like AAON. But we take comfort in the fact that they have invested in the company. Notably, they have an enviable stake in the company, worth $1.2 billion. At 18% of the company, this stake gives insiders a lot of influence and plenty of incentive to drive shareholder value. This looks very bullish for investors.

While it is always positive to see strong insider conviction in a company, through significant investment, it is also important for shareholders to question whether executive compensation policies are reasonable. A brief analysis of CEO compensation suggests that this is the case. For companies with a market capitalization of $4.0b to $12b, such as AAON, the median CEO compensation is about $8.5m.

The story continues

AAON’s CEO earned total compensation of US$5m in the year to December 2023. This is actually lower than the average for CEOs at similarly sized companies. CEO compensation is not exactly the most important aspect of a company to consider, but when it is reasonable, it gives a bit more confidence that management is looking out for shareholders. It can also be a sign of a culture of integrity, more broadly speaking.

Should you add AAON to your watchlist?

If you think the stock price is tracking earnings per share, you should definitely take a closer look at AAON’s strong EPS growth. If you’re still in doubt, also keep in mind that company insiders have invested a significant amount of money to align with shareholders, and CEO compensation is quite modest compared to similarly sized companies. This may be just a quick overview, but the key takeaway is that AAON is worth keeping an eye on. Once you’ve identified a company you like, the next step is to figure out what you think it’s worth. And now’s your chance to check out our exclusive discounted cash flow valuation of AAON. You might want to take a look today.

While opting for stocks without earnings growth and insider buying can yield results, for investors who value these key metrics, here is a hand-picked list of companies in the United States with promising growth potential and insider confidence.

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

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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 constitute financial advice. This 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 provide you with focused, long-term analysis based on fundamental data. Please note that our analysis may not factor in the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any of the stocks mentioned.

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