Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in . found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
In contrast to all that, I prefer to spend time on companies like Navistar International (NYSE:NAV), which has not only revenues, but also profits. While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Fast Is Navistar International Growing Its Earnings Per Share?
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 a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Navistar International grew its EPS from US$0.19 to US$4.28, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Navistar International’s EBIT margins were flat over the last year, revenue grew by a solid 22% to US$11b. That’s progress.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
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 Navistar International’s future profits.
Are Navistar International Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
Like a sturdy phalanx Navistar International insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Independent Director, Stephen D’Arcy, paid US$93k to buy shares at an average price of US$26.69.
Is Navistar International Worth Keeping An Eye On?
Navistar International’s earnings per share have taken off like a rocket aimed right at the moon. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. For me, this situation certainly piques my interest. Of course, just because Navistar International is growing does not mean it is undervalued. If you’re wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
As a growth investor I do like to see insider buying. But Navistar International isn’t the only one. You can see a a free list of them here.Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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