Do Atmos Energy's (NYSE:ATO) Earnings Warrant Your Attention?

Atmos Energy Corporation -0.65%

Atmos Energy Corporation

ATO

112.33

-0.65%

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Atmos Energy (NYSE:ATO). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Atmos Energy

How Quickly Is Atmos Energy Increasing Earnings Per Share?

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. Atmos Energy managed to grow EPS by 6.0% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Atmos Energy's EBIT margins have actually improved by 8.4 percentage points in the last year, to reach 29%, but, on the flip side, revenue was down 15%. While not disastrous, these figures could be better.

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.

earnings-and-revenue-history
NYSE:ATO Earnings and Revenue History March 28th 2024

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Atmos Energy's forecast profits?

Are Atmos Energy Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$18b company like Atmos Energy. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Given insiders own a significant chunk of shares, currently valued at US$53m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Atmos Energy, with market caps over US$8.0b, is around US$12m.

Atmos Energy offered total compensation worth US$8.1m to its CEO in the year to September 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Atmos Energy Deserve A Spot On Your Watchlist?

One important encouraging feature of Atmos Energy is that it is growing profits. The fact that EPS is growing is a genuine positive for Atmos Energy, but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. However, before you get too excited we've discovered 2 warning signs for Atmos Energy that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.

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

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