Should You Be Adding Laboratory Corporation of America Holdings (NYSE:LH) To Your Watchlist Today?

By
Simply Wall St
Published
March 18, 2022
NYSE:LH
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Laboratory Corporation of America Holdings (NYSE:LH). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Laboratory Corporation of America Holdings

How Quickly Is Laboratory Corporation of America Holdings Increasing Earnings Per Share?

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). It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Laboratory Corporation of America Holdings has grown EPS by 43% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. Laboratory Corporation of America Holdings maintained stable EBIT margins over the last year, all while growing revenue 15% to US$16b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NYSE:LH Earnings and Revenue History March 18th 2022

Fortunately, we've got access to analyst forecasts of Laboratory Corporation of America Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Laboratory Corporation of America Holdings 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, small purchases are not always indicative of conviction, and insiders don't always get it right.

In twelve months, insiders sold -US$908k worth of Laboratory Corporation of America Holdings shares. On the other hand, Lead Independent Director Peter Neupert paid US$923k for shares, at a price of about US$264 per share. And that's a reason to be optimistic.

The good news, alongside the insider buying, for Laboratory Corporation of America Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. Given insiders own a small fortune of shares, currently valued at US$53m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Should You Add Laboratory Corporation of America Holdings To Your Watchlist?

Laboratory Corporation of America Holdings's earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Laboratory Corporation of America Holdings deserves timely attention. However, before you get too excited we've discovered 1 warning sign for Laboratory Corporation of America Holdings that you should be aware of.

As a growth investor I do like to see insider buying. But Laboratory Corporation of America Holdings isn't the only one. You can see a a free list of them here.

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

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