Does NEXT (LON:NXT) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in NEXT (LON:NXT). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for NEXT

NEXT's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years NEXT grew its EPS by 7.6% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. NEXT maintained stable EBIT margins over the last year, all while growing revenue 8.9% to UK£5.0b. 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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for NEXT's future EPS 100% free.

Are NEXT Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We do note that, in the last year, insiders sold UK£397k worth of shares. But that's far less than the UK£11m insiders spent purchasing stock. This adds to the interest in NEXT because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by CEO & Executive Director Simon Wolfson for UK£10m worth of shares, at about UK£60.95 per share.

Along with the insider buying, another encouraging sign for NEXT is that insiders, as a group, have a considerable shareholding. We note that their impressive stake in the company is worth UK£104m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Is NEXT Worth Keeping An Eye On?

One positive for NEXT is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for NEXT that you should be aware of.

The good news is that NEXT is not the only growth stock with insider buying. Here's a list of them... 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.