We Ran A Stock Scan For Earnings Growth And Taylor Morrison Home (NYSE:TMHC) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Taylor Morrison Home (NYSE:TMHC), 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.

Check out our latest analysis for Taylor Morrison Home

How Quickly Is Taylor Morrison Home 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. Taylor Morrison Home's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 60%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Taylor Morrison Home shareholders can take confidence from the fact that EBIT margins are up from 12% to 18%, and revenue is growing. That's great to see, on both counts.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Taylor Morrison Home's future EPS 100% free.

Are Taylor Morrison Home Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

For the sake of balance, it should be noted that Taylor Morrison Home insiders sold US$186k worth of shares last year. This falls short of the share acquisition by Executive VP & CFO Louis Steffens, who has acquired US$254k worth of shares, at an average price of US$23.07. So, on balance, that's positive.

The good news, alongside the insider buying, for Taylor Morrison Home bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$184m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does Taylor Morrison Home Deserve A Spot On Your Watchlist?

Taylor Morrison Home's earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Taylor Morrison Home belongs near the top of your watchlist. Before you take the next step you should know about the 2 warning signs for Taylor Morrison Home (1 is a bit concerning!) that we have uncovered.

Keen growth investors love to see insider buying. Thankfully, Taylor Morrison Home 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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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.