If You Like EPS Growth Then Check Out Brady (NYSE:BRC) Before It’s Too Late

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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Brady (NYSE:BRC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

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View our latest analysis for Brady

Brady’s Improving Profits

In the last three years Brady’s earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn’t tell us much. As a result, I’ll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Brady’s EPS soared from US$1.50 to US$2.30, in just one year. That’s a commendable gain of 54%.

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. Brady maintained stable EBIT margins over the last year, all while growing revenue 2.5% to US$1.2b. That’s progress.

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.

NYSE:BRC Income Statement, May 18th 2019
NYSE:BRC Income Statement, May 18th 2019

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Brady.

Are Brady Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Brady insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth US$239m. 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 Brady To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Brady’s strong EPS growth. I think that EPS growth is something to boast of, and it doesn’t surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. If you think Brady might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.