Should You Be Adding Greenbrier Companies (NYSE:GBX) To Your Watchlist Today?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Greenbrier Companies (NYSE:GBX). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Greenbrier Companies

How Fast Is Greenbrier Companies Growing Its Earnings Per Share?

In the last three years Greenbrier Companies' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Greenbrier Companies' EPS grew from US$1.22 to US$3.56, over the previous 12 months. Year on year growth of 192% is certainly a sight to behold.

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. It's noted that Greenbrier Companies' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Greenbrier Companies shareholders can take confidence from the fact that EBIT margins are up from 4.2% to 6.9%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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 Greenbrier Companies' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Greenbrier Companies Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Greenbrier Companies insiders have a significant amount of capital invested in the stock. With a whopping US$51m worth of shares as a group, insiders have plenty riding on the company's success. This would indicate that the goals of shareholders and management are one and the same.

Should You Add Greenbrier Companies To Your Watchlist?

Greenbrier Companies' earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Greenbrier Companies is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Greenbrier Companies (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com