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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
In contrast to all that, I prefer to spend time on companies like Agilent Technologies (NYSE:A), which has not only revenues, but also profits. While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
Agilent Technologies’s Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It’s no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Agilent Technologies’s EPS has grown 34% 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 smiling.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Agilent Technologies’s EBIT margins were flat over the last year, revenue grew by a solid 5.1% to US$5.2b. That’s progress.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
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 Agilent Technologies’s future profits.
Are Agilent Technologies Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$27b company like Agilent Technologies. But we are reassured by the fact they have invested in the company. Given insiders own a small fortune of shares, currently valued at US$83m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.
Should You Add Agilent Technologies To Your Watchlist?
You can’t deny that Agilent Technologies 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. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Agilent Technologies.
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
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