Stock Analysis

I Ran A Stock Scan For Earnings Growth And PPG Industries (NYSE:PPG) Passed With Ease

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NYSE:PPG
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like PPG Industries (NYSE:PPG), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for PPG Industries

How Quickly Is PPG Industries Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Over the last three years, PPG Industries has grown EPS by 6.9% per year. While that sort of growth rate isn't amazing, it does show the business is growing.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note PPG Industries's EBIT margins were flat over the last year, revenue grew by a solid 19% to US$16b. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
NYSE:PPG Earnings and Revenue History December 22nd 2021

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

Are PPG Industries Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$39b company like PPG Industries. But we are reassured by the fact they have invested in the company. With a whopping US$58m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to make me think that management will be very focussed on long term growth.

Should You Add PPG Industries To Your Watchlist?

One positive for PPG Industries is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. What about risks? Every company has them, and we've spotted 1 warning sign for PPG Industries you should know about.

Although PPG Industries certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.

Find out whether PPG Industries is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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