PulteGroup (NYSE:PHM) Ticks All The Boxes When It Comes To Earnings Growth

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like PulteGroup (NYSE:PHM), which has not only revenues, but also profits. 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.

See our latest analysis for PulteGroup

How Quickly Is PulteGroup Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that PulteGroup has managed to grow EPS by 29% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. While we note PulteGroup achieved similar EBIT margins to last year, revenue grew by a solid 2.8% to US$17b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for PulteGroup?

Are PulteGroup Insiders Aligned With All Shareholders?

Since PulteGroup has a market capitalisation of US$27b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$187m. We note that this amounts to 0.7% of the company, which may be small owing to the sheer size of PulteGroup but it's still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Should You Add PulteGroup To Your Watchlist?

You can't deny that PulteGroup has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in PulteGroup's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Even so, be aware that PulteGroup is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...

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.

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

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.