Yahoo Finance I Ran A Stock Scan For Earnings Growth And NMC Health (LON:NMC) Passed With Ease
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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like NMC Health (LON:NMC). 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Check out our latest analysis for NMC Health
How Fast Is NMC Health Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that NMC Health has managed to grow EPS by 32% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. NMC Health maintained stable EBIT margins over the last year, all while growing revenue 34% to US$2.4b. That's a real positive.
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.
Fortunately, we've got access to analyst forecasts of NMC Health's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are NMC Health Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Insiders both bought and sold NMC Health shares in the last year, but the good news is they spent US$33k more buying than they netted selling. When you weigh that up, it is a mild positive, indicating increased alignment between shareholders and management. It is also worth noting that it was Independent Non-Executive Director Salma Ali Saif Bin Hareb Almheiri who made the biggest single purchase, worth UK£148k, paying UK£26.99 per share.
And the insider buying isn't the only sign of alignment between shareholders and the board, since NMC Health insiders own more than a third of the company. Actually, with 48% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. At the current share price, that insider holding is worth a whopping US$2.8b. That means they have plenty of their own capital riding on the performance of the business!
Does NMC Health Deserve A Spot On Your Watchlist?
For growth investors like me, NMC Health's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So it's fair to say I think this stock may well deserve a spot on your watchlist. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of NMC Health. You might benefit from giving it a glance today.
As a growth investor I do like to see insider buying. But NMC Health isn't the only one. You can see a 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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