Yahoo Finance Is Now The Time To Put Greenlight Capital Re (NASDAQ:GLRE) On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Greenlight Capital Re (NASDAQ:GLRE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Greenlight Capital Re with the means to add long-term value to shareholders.
View our latest analysis for Greenlight Capital Re
Greenlight Capital Re's Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Greenlight Capital Re's EPS has grown 29% each year, compound, over 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. It's noted that Greenlight Capital Re's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Greenlight Capital Re shareholders can take confidence from the fact that EBIT margins are up from 8.4% to 17%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Greenlight Capital Re's balance sheet strength, before getting too excited.
Are Greenlight Capital Re Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Greenlight Capital Re insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at US$64m, they have plenty of motivation to push the business to succeed. That holding amounts to 14% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.
Should You Add Greenlight Capital Re To Your Watchlist?
For growth investors, Greenlight Capital Re's raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Greenlight Capital Re's ROE with industry peers (and the market at large).
Although Greenlight Capital Re certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
