Should You Be Adding Newmark Group (NASDAQ:NMRK) To Your Watchlist Today?

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.'

So if you're like me, you might be more interested in profitable, growing companies, like Newmark Group (NASDAQ:NMRK). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Newmark Group

Newmark Group's Improving Profits

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Newmark Group's EPS went from US$0.42 to US$2.93 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

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 Newmark Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Newmark Group shareholders can take confidence from the fact that EBIT margins are up from 6.3% to 43%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

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

Are Newmark Group 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. As a result, I'm encouraged by the fact that insiders own Newmark Group shares worth a considerable sum. Notably, they have an enormous stake in the company, worth US$132m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Does Newmark Group Deserve A Spot On Your Watchlist?

Newmark Group's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Newmark Group is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Newmark Group is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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