Yahoo Finance Should You Be Adding PGT Innovations (NYSE:PGTI) To Your Watchlist Today?
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like PGT Innovations (NYSE:PGTI), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for PGT Innovations
How Quickly Is PGT Innovations Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, PGT Innovations has grown EPS by 29% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. PGT Innovations shareholders can take confidence from the fact that EBIT margins are up from 9.1% to 12%, and revenue is growing. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for PGT Innovations' future profits.
Are PGT Innovations Insiders Aligned With All Shareholders?
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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Insider selling of PGT Innovations shares was insignificant compared to the one buyer, over the last twelve months. To be exact, Independent Director Richard Feintuch put their money where their mouth is, paying US$385k at an average of price of US$19.24 per share That can definitely be seen as a sign of conviction.
The good news, alongside the insider buying, for PGT Innovations bulls is that insiders (collectively) have a meaningful investment in the stock. Given insiders own a significant chunk of shares, currently valued at US$80m, 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.
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. The cherry on top is that the CEO, Jeff Jackson is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to PGT Innovations, with market caps between US$1.0b and US$3.2b, is around US$5.3m.
PGT Innovations offered total compensation worth US$4.4m to its CEO in the year to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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 good governance, more generally.
Does PGT Innovations Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into PGT Innovations' strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. What about risks? Every company has them, and we've spotted 1 warning sign for PGT Innovations you should know about.
The good news is that PGT Innovations 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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