Yahoo Finance Here's Why I Think CNH Industrial (NYSE:CNHI) Is An Interesting Stock
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
So if you're like me, you might be more interested in profitable, growing companies, like CNH Industrial (NYSE:CNHI). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
See our latest analysis for CNH Industrial
CNH Industrial's Improving Profits
Over the last three years, CNH Industrial has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, CNH Industrial's EPS shot from US$0.43 to US$0.85, over the last year. Year on year growth of 96% is certainly a sight to behold.
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 CNH Industrial may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.
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.
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 CNH Industrial's future profits.
Are CNH Industrial Insiders Aligned With All Shareholders?
Since CNH Industrial has a market capitalization of US$15b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they hold US$29m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Is CNH Industrial Worth Keeping An Eye On?
CNH Industrial's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind CNH Industrial is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if CNH Industrial is trading on a high P/E or a low P/E, relative to its industry.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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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