Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. 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 National Vision Holdings (NASDAQ:EYE). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Fast Is National Vision Holdings Growing?
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. Impressively, National Vision Holdings has grown EPS by 21% per year, compound, in the last three years. So it’s not surprising to see the company trades on a very high multiple of (past) earnings.
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. While we note National Vision Holdings’s EBIT margins were flat over the last year, revenue grew by a solid 12% to US$1.7b. That’s progress.
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.
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 National Vision Holdings?
Are National Vision Holdings Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Like a sturdy phalanx National Vision Holdings insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the , Thomas Taylor, paid US$100k to buy shares at an average price of US$27.67.
Along with the insider buying, another encouraging sign for National Vision Holdings is that insiders, as a group, have a considerable shareholding. To be specific, they have US$32m worth of shares. That’s a lot of money, and no small incentive to work hard. Despite being just 1.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, L. Fahs is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like National Vision Holdings with market caps between US$2.0b and US$6.4b is about US$5.1m.
The CEO of National Vision Holdings only received US$1.6m in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation isn’t a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Is National Vision Holdings Worth Keeping An Eye On?
You can’t deny that National Vision Holdings has grown its earnings per share at a very impressive rate. That’s attractive. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So I do think this is one stock worth watching. We should say that we’ve discovered 3 warning signs for National Vision Holdings (1 can’t be ignored!) that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of National Vision Holdings, 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.