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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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
So if you’re like me, you might be more interested in profitable, growing companies, like National Beverage (NASDAQ:FIZZ). Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
National Beverage’s Earnings Per Share Are Growing.
If you believe that markets are even vaguely efficient, then over the long term you’d expect a company’s share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Who among us would not applaud National Beverage’s stratospheric annual EPS growth of 39%, compound, over the last three years? While that sort of growth rate isn’t sustainable for long, it certainly catches my attention; like a glint in the eye of my lover.
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. National Beverage maintained stable EBIT margins over the last year, all while growing revenue 8.0% to US$1.0b. That’s progress.
The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future National Beverage EPS 100% free.
Are National Beverage Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
First things first; I didn’t see insiders sell National Beverage shares in the last year. But the really good news is that President & Director Joseph Caporella spent US$360k buying stock stock, at an average price of around US$59.95. Big buys like that give me a sense of opportunity; actions speak louder than words.
On top of the insider buying, it’s good to see that National Beverage insiders have a valuable investment in the business. Given insiders own a small fortune of shares, currently valued at US$91m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.
Does National Beverage Deserve A Spot On Your Watchlist?
National Beverage’s earnings per share have taken off like a rocket aimed right at the moon. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. For me, this situation certainly piques my interest. Once you’ve identified a business you like, the next step is to consider what you think it’s worth. And right now is your chance to view our exclusive discounted cashflow valuation of National Beverage. You might benefit from giving it a glance today.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of National Beverage, you’ll probably love this free list of growing companies that insiders are buying.Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.