Here's Why We Think Lamb Weston Holdings (NYSE:LW) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Lamb Weston Holdings (NYSE:LW). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Lamb Weston Holdings

How Fast Is Lamb Weston Holdings Growing Its Earnings Per Share?

Lamb Weston Holdings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Impressively, Lamb Weston Holdings' EPS catapulted from US$3.76 to US$7.58, over the last year. It's a rarity to see 102% year-on-year growth like that. That could be a sign that the business has reached a true inflection point.

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 Lamb Weston Holdings achieved similar EBIT margins to last year, revenue grew by a solid 36% to US$6.6b. That's encouraging news for the company!

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Lamb Weston Holdings?

Are Lamb Weston Holdings Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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, there weren't any reports of insiders selling shares in Lamb Weston Holdings in the last 12 months. But the important part is that Independent Non-Executive Chairman William Jurgensen spent US$253k buying stock, at an average price of US$84.35. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.

The good news, alongside the insider buying, for Lamb Weston Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping US$62m 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 Lamb Weston Holdings Deserve A Spot On Your Watchlist?

Lamb Weston Holdings' earnings per share growth have been climbing higher at an appreciable rate. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Lamb Weston Holdings deserves timely attention. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Lamb Weston Holdings (1 is potentially serious) you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Lamb Weston Holdings isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by high insider ownership.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com