For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Boston Scientific (NYSE:BSX). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
How Fast Is Boston Scientific Growing Its Earnings Per Share?
Over the last three years, Boston Scientific has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don’t think the percent growth rate is particularly meaningful. As a result, I’ll zoom in on growth over the last year, instead. Like a falcon taking flight, Boston Scientific’s EPS soared from US$0.49 to US$0.78, over the last year. That’s a commendable gain of 61%.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Boston Scientific’s EBIT margins were flat over the last year, revenue grew by a solid 7.5% to US$10b. That’s progress.
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.
Fortunately, we’ve got access to analyst forecasts of Boston Scientific’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Boston Scientific Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$58b company like Boston Scientific. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$162m. This suggests to me that leadership will be very mindful of shareholders’ interests when making decisions!
Is Boston Scientific Worth Keeping An Eye On?
You can’t deny that Boston Scientific 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. If you think Boston Scientific might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
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 email@example.com. 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.
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