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. 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 Lowe’s Companies (NYSE:LOW). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. 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.
See our latest analysis for Lowe’s Companies
How Fast Is Lowe’s Companies 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). That makes EPS growth an attractive quality for any company. Impressively, Lowe’s Companies has grown EPS by 29% per year, compound, in the last three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be smiling.
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. Lowe’s Companies shareholders can take confidence from the fact that EBIT margins are up from 7.1% to 11%, and revenue is growing. 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. For finer detail, click on the image.
While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Lowe’s Companies?
Are Lowe’s Companies Insiders Aligned With All Shareholders?
Since Lowe’s Companies has a market capitalization of US$131b, 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. Notably, they have an enormous stake in the company, worth US$224m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Is Lowe’s Companies Worth Keeping An Eye On?
You can’t deny that Lowe’s Companies has grown its earnings per share at a very impressive rate. That’s attractive. I think that EPS growth is something to boast of, and it doesn’t surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. It’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with Lowe’s Companies , and understanding them should be part of your investment process.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
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. 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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