Is Now The Time To Put National Western Life Group (NASDAQ:NWLI) On Your Watchlist?

By
Simply Wall St
Published
November 08, 2021
NasdaqGS:NWLI
Source: Shutterstock

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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in National Western Life Group (NASDAQ:NWLI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 National Western Life Group

National Western Life Group's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, National Western Life Group has grown EPS by 9.3% per year. That's a pretty good rate, if the company can sustain it.

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 National Western Life Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. The good news is that National Western Life Group is growing revenues, and EBIT margins improved by 2.5 percentage points to 22%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
NasdaqGS:NWLI Earnings and Revenue History November 9th 2021

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check National Western Life Group's balance sheet strength, before getting too excited.

Are National Western Life Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news for National Western Life Group shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Reynaldo Perez, the Senior Vice President of the company, paid US$22k for shares at around US$200 each.

On top of the insider buying, it's good to see that National Western Life Group insiders have a valuable investment in the business. Notably, they have an enormous stake in the company, worth US$255m. That equates to 30% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

Does National Western Life Group Deserve A Spot On Your Watchlist?

One positive for National Western Life Group is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if National Western Life Group is trading on a high P/E or a low P/E, relative to its industry.

The good news is that National Western Life Group is not the only growth stock with insider buying. Here's a list of them... 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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