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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you're like me, you might be more interested in profitable, growing companies, like Lowe's Companies (NYSE:LOW). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Quickly Is Lowe's Companies Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Lowe's Companies has managed to grow EPS by 28% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Lowe's Companies is growing revenues, and EBIT margins improved by 2.2 percentage points to 13%, over the last year. That's great to see, on both counts.
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Lowe's Companies's forecast profits?
Are Lowe's Companies Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.
One shining light for Lowe's Companies is the serious outlay one insider has made to buy shares, in the last year. Indeed, Independent Director David Batchelder has accumulated shares over the last year, paying a total of US$997k at an average price of about US$159. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.
On top of the insider buying, it's good to see that Lowe's Companies insiders have a valuable investment in the business. Given insiders own a small fortune of shares, currently valued at US$81m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.
Is Lowe's Companies Worth Keeping An Eye On?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Lowe's Companies's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. So I do think this is one stock worth watching. You still need to take note of risks, for example - Lowe's Companies has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Lowe's Companies, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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