It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like JELD-WEN Holding (NYSE:JELD), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Fast Is JELD-WEN Holding Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, JELD-WEN Holding's EPS has grown 22% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
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. It seems JELD-WEN Holding is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
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 JELD-WEN Holding's future profits.
Are JELD-WEN Holding Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Like a sturdy phalanx JELD-WEN Holding insiders have stood united by refusing to sell shares over the last year. But my excitement comes from the US$127k that President Gary Michel spent buying shares (at an average price of about US$12.68).
Along with the insider buying, another encouraging sign for JELD-WEN Holding is that insiders, as a group, have a considerable shareholding. Notably, they have an enormous stake in the company, worth US$117m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Should You Add JELD-WEN Holding To Your Watchlist?
You can't deny that JELD-WEN Holding has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So I do think this is one stock worth watching. Before you take the next step you should know about the 1 warning sign for JELD-WEN Holding that we have uncovered.
The good news is that JELD-WEN Holding 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. 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.
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