Yahoo Finance Should You Be Adding W.W. Grainger (NYSE:GWW) To Your Watchlist Today?
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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like W.W. Grainger (NYSE:GWW). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide W.W. Grainger with the means to add long-term value to shareholders.
View our latest analysis for W.W. Grainger
How Quickly Is W.W. Grainger Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. W.W. Grainger's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 46%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
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. While we note W.W. Grainger achieved similar EBIT margins to last year, revenue grew by a solid 10% to US$16b. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of W.W. Grainger's forecast profits?
Are W.W. Grainger Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$41b company like W.W. Grainger. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$2.5b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like W.W. Grainger, with market caps over US$8.0b, is about US$12m.
The W.W. Grainger CEO received US$10.0m in compensation for the year ending December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does W.W. Grainger Deserve A Spot On Your Watchlist?
W.W. Grainger's earnings per share have been soaring, with growth rates sky high. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The sharp increase in earnings could signal good business momentum. W.W. Grainger is certainly doing some things right and is well worth investigating. You still need to take note of risks, for example - W.W. Grainger has 1 warning sign we think 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 free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
