With EPS Growth And More, OneMain Holdings (NYSE:OMF) Is Interesting

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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 OneMain Holdings (NYSE:OMF), 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.

See our latest analysis for OneMain Holdings

OneMain Holdings's Improving Profits

In the last three years OneMain Holdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, OneMain Holdings's EPS shot from US$4.68 to US$10.89, over the last year. You don't see 133% year-on-year growth like that, very often. That could be a sign that the business has reached a true inflection point.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that OneMain Holdings's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note OneMain Holdings's EBIT margins were flat over the last year, revenue grew by a solid 42% to US$3.5b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

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

Are OneMain Holdings Insiders Aligned With All Shareholders?

Since OneMain Holdings has a market capitalization of US$6.4b, 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. Notably, they have an enormous stake in the company, worth US$223m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Does OneMain Holdings Deserve A Spot On Your Watchlist?

OneMain Holdings's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering OneMain Holdings for a spot on your watchlist. However, before you get too excited we've discovered 3 warning signs for OneMain Holdings (2 are concerning!) that you should be aware of.

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.

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.

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