Stock Analysis

With EPS Growth And More, BJ's Wholesale Club Holdings (NYSE:BJ) Makes An Interesting Case

NYSE:BJ
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like BJ's Wholesale Club Holdings (NYSE:BJ). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide BJ's Wholesale Club Holdings with the means to add long-term value to shareholders.

Check out our latest analysis for BJ's Wholesale Club Holdings

How Fast Is BJ's Wholesale Club Holdings Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that BJ's Wholesale Club Holdings has managed to grow EPS by 33% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. While we note BJ's Wholesale Club Holdings achieved similar EBIT margins to last year, revenue grew by a solid 16% to US$18b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NYSE:BJ Earnings and Revenue History August 29th 2022

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of BJ's Wholesale Club Holdings' forecast profits?

Are BJ's Wholesale Club Holdings Insiders Aligned With All Shareholders?

Owing to the size of BJ's Wholesale Club Holdings, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. With a whopping US$90m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Does BJ's Wholesale Club Holdings Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into BJ's Wholesale Club Holdings' strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. What about risks? Every company has them, and we've spotted 2 warning signs for BJ's Wholesale Club Holdings you should know about.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether BJ's Wholesale Club Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.