Here's Why We Think Acrow Formwork and Construction Services (ASX:ACF) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Acrow Formwork and Construction Services (ASX:ACF), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Acrow Formwork and Construction Services with the means to add long-term value to shareholders.

Check out our latest analysis for Acrow Formwork and Construction Services

In the last three years Acrow Formwork and Construction Services' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Acrow Formwork and Construction Services' EPS shot from AU$0.041 to AU$0.071, over the last year. It's not often a company can achieve year-on-year growth of 73%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. The music to the ears of Acrow Formwork and Construction Services shareholders is that EBIT margins have grown from 8.5% to 14% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Acrow Formwork and Construction Services' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Despite AU$160k worth of sales, Acrow Formwork and Construction Services insiders have overwhelmingly been buying the stock, spending AU$675k on purchases in the last twelve months. An optimistic sign for those with Acrow Formwork and Construction Services in their watchlist. It is also worth noting that it was CEO, MD & Executive Director Steven Boland who made the biggest single purchase, worth AU$145k, paying AU$0.72 per share.

The good news, alongside the insider buying, for Acrow Formwork and Construction Services bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold AU$25m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 13% of the company, demonstrating a degree of high-level alignment with shareholders.

Acrow Formwork and Construction Services' earnings per share growth have been climbing higher at an appreciable rate. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Acrow Formwork and Construction Services belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 4 warning signs for Acrow Formwork and Construction Services you should be aware of.

The good news is that Acrow Formwork and Construction Services is not the only growth stock with insider buying. Here's a list of them... 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St 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 be financial advice. 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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