Yahoo Finance Here's Why Palo Alto Networks (NASDAQ:PANW) Has Caught The Eye Of Investors
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.
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 Palo Alto Networks (NASDAQ:PANW). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Palo Alto Networks with the means to add long-term value to shareholders.
See our latest analysis for Palo Alto Networks
How Fast Is Palo Alto Networks Growing Its Earnings Per Share?
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that Palo Alto Networks' EPS went from US$0.11 to US$7.05 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Palo Alto Networks shareholders can take confidence from the fact that EBIT margins are up from 0.4% to 10%, and revenue is growing. Both of which are great metrics to check off for potential growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
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 Palo Alto Networks' future profits.
Are Palo Alto Networks Insiders Aligned With All Shareholders?
Since Palo Alto Networks has a market capitalisation of US$91b, we wouldn't expect insiders to hold a large percentage of shares. 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. Notably, they have an enviable stake in the company, worth US$871m. We note that this amounts to 1.0% of the company, which may be small owing to the sheer size of Palo Alto Networks but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.
Does Palo Alto Networks Deserve A Spot On Your Watchlist?
Palo Alto Networks' earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Palo Alto Networks very closely. However, before you get too excited we've discovered 2 warning signs for Palo Alto Networks (1 can't be ignored!) that you should be aware of.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
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.
