Do Greif's (NYSE:GEF) Earnings Warrant Your Attention?

By
Simply Wall St
Published
January 04, 2022
NYSE:GEF
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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Greif (NYSE:GEF). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.

Check out our latest analysis for Greif

Greif's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Greif's EPS has grown 23% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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. While we note Greif's EBIT margins were flat over the last year, revenue grew by a solid 23% to US$5.6b. That's progress.

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.

earnings-and-revenue-history
NYSE:GEF Earnings and Revenue History January 4th 2022

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

Are Greif Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Greif insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth US$863m. That equates to 30% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Does Greif Deserve A Spot On Your Watchlist?

For growth investors like me, Greif's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Before you take the next step you should know about the 2 warning signs for Greif that we have uncovered.

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.

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