Stock Analysis

I Ran A Stock Scan For Earnings Growth And Lakeland Industries (NASDAQ:LAKE) Passed With Ease

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NasdaqGM:LAKE
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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.

In contrast to all that, I prefer to spend time on companies like Lakeland Industries (NASDAQ:LAKE), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Lakeland Industries

How Fast Is Lakeland Industries 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. It is therefore awe-striking that Lakeland Industries's EPS went from US$0.023 to US$3.57 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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). The good news is that Lakeland Industries is growing revenues, and EBIT margins improved by 21.6 percentage points to 24%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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.

earnings-and-revenue-history
NasdaqGM:LAKE Earnings and Revenue History January 18th 2021

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 Lakeland Industries's future profits.

Are Lakeland Industries Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. I discovered that the median total compensation for the CEOs of companies like Lakeland Industries with market caps between US$100m and US$400m is about US$1.0m.

Lakeland Industries offered total compensation worth US$607k to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Does Lakeland Industries Deserve A Spot On Your Watchlist?

Lakeland Industries's earnings per share have taken off like a rocket aimed right at the moon. Such fast EPS growth makes me wonder if the business has hit an inflection point (and I mean the good kind.) At the same time the reasonable CEO compensation reflects well on the board of directors. While I couldn't be sure without a deeper dive, it does seem that Lakeland Industries has the hallmarks of a quality business; and that would make it well worth watching. Even so, be aware that Lakeland Industries is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

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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What are the risks and opportunities for Lakeland Industries?

Lakeland Industries, Inc. manufactures and sells industrial protective clothing and accessories for the industrial and public protective clothing market worldwide.

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Rewards

  • Earnings are forecast to grow 111.62% per year

Risks

  • Profit margins (2%) are lower than last year (14.8%)

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