Here's Why I Think BlueLinx Holdings (NYSE:BXC) Might Deserve Your Attention Today

By
Simply Wall St
Published
May 04, 2022
NYSE:BXC
Source: Shutterstock

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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like BlueLinx Holdings (NYSE:BXC). 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.

See our latest analysis for BlueLinx Holdings

BlueLinx Holdings's Improving Profits

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that BlueLinx Holdings's EPS went from US$8.55 to US$30.43 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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. BlueLinx Holdings shareholders can take confidence from the fact that EBIT margins are up from 4.1% to 10.0%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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.

earnings-and-revenue-history
NYSE:BXC Earnings and Revenue History May 4th 2022

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 BlueLinx Holdings's future profits.

Are BlueLinx Holdings Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that BlueLinx Holdings insiders have a significant amount of capital invested in the stock. To be specific, they have US$14m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.8% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is BlueLinx Holdings Worth Keeping An Eye On?

BlueLinx Holdings's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering BlueLinx Holdings for a spot on your watchlist. Still, you should learn about the 5 warning signs we've spotted with BlueLinx Holdings (including 2 which shouldn't be ignored) .

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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