Stock Analysis

With EPS Growth And More, Nucor (NYSE:NUE) Is Interesting

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NYSE:NUE
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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 as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Nucor (NYSE:NUE). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

View our latest analysis for Nucor

How Quickly Is Nucor 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. Who among us would not applaud Nucor's stratospheric annual EPS growth of 50%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

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. The good news is that Nucor is growing revenues, and EBIT margins improved by 17.6 percentage points to 26%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:NUE Earnings and Revenue History February 19th 2022

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

Are Nucor Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$33b company like Nucor. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$167m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

Does Nucor Deserve A Spot On Your Watchlist?

Nucor's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Nucor for a spot on your watchlist. Still, you should learn about the 2 warning signs we've spotted with Nucor (including 1 which is potentially serious) .

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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

Valuation is complex, but we're helping make it simple.

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