We Ran A Stock Scan For Earnings Growth And Beacon Roofing Supply (NASDAQ:BECN) Passed With Ease

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Beacon Roofing Supply (NASDAQ:BECN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Beacon Roofing Supply with the means to add long-term value to shareholders.

See our latest analysis for Beacon Roofing Supply

Beacon Roofing Supply's Improving Profits

Beacon Roofing Supply has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Beacon Roofing Supply's EPS shot up from US$3.93 to US$5.52; a result that's bound to keep shareholders happy. That's a fantastic gain of 41%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Beacon Roofing Supply remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 15% to US$8.5b. That's a real positive.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Beacon Roofing Supply's forecast profits?

Are Beacon Roofing Supply Insiders Aligned With All Shareholders?

Owing to the size of Beacon Roofing Supply, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$30m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Beacon Roofing Supply, with market caps between US$4.0b and US$12b, is around US$7.9m.

Beacon Roofing Supply's CEO took home a total compensation package worth US$5.9m in the year leading up to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Beacon Roofing Supply Deserve A Spot On Your Watchlist?

You can't deny that Beacon Roofing Supply has grown its earnings per share at a very impressive rate. That's attractive. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. The overarching message here is that Beacon Roofing Supply has underlying strengths that make it worth a look at. Even so, be aware that Beacon Roofing Supply is showing 2 warning signs in our investment analysis , you should know about...

Although Beacon Roofing Supply certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.