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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Lincoln Educational Services (NASDAQ:LINC). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Lincoln Educational Services's Improving Profits
In a capitalist society capital chases profits, and that means share prices tend rise with 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 Lincoln Educational Services's EPS went from US$0.08 to US$1.49 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.
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 Lincoln Educational Services's EBIT margins were flat over the last year, revenue grew by a solid 7.2% to US$293m. 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.
Fortunately, we've got access to analyst forecasts of Lincoln Educational Services's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Lincoln Educational Services Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Lincoln Educational Services shares worth a considerable sum. To be specific, they have US$17m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 9.5% of the company, demonstrating a degree of high-level alignment with shareholders.
Should You Add Lincoln Educational Services To Your Watchlist?
Lincoln Educational Services's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Lincoln Educational Services is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Lincoln Educational Services (at least 2 which can't be ignored) , and understanding them should be part of your investment process.
You can invest in 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.
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Lincoln Educational Services
Lincoln Educational Services Corporation, together with its subsidiaries, provides various career-oriented post-secondary education services to high school graduates and working adults in the United States.
Flawless balance sheet and fair value.