Here's Why Weyerhaeuser (NYSE:WY) Has Caught The Eye Of Investors

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Weyerhaeuser (NYSE:WY). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Weyerhaeuser

How Fast Is Weyerhaeuser Growing Its Earnings Per Share?

Over the last three years, Weyerhaeuser has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Over the last year, Weyerhaeuser increased its EPS from US$3.05 to US$3.32. That's a fair increase of 8.7%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Weyerhaeuser's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. On the one hand, Weyerhaeuser's EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Weyerhaeuser's future profits.

Are Weyerhaeuser Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, 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.

First things first, there weren't any reports of insiders selling shares in Weyerhaeuser in the last 12 months. But the really good news is that Independent Director Al Monaco spent US$251k buying stock, at an average price of around US$38.61. Big buys like that may signal an opportunity; actions speak louder than words.

On top of the insider buying, it's good to see that Weyerhaeuser insiders have a valuable investment in the business. Given insiders own a significant chunk of shares, currently valued at US$70m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Is Weyerhaeuser Worth Keeping An Eye On?

As previously touched on, Weyerhaeuser is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Weyerhaeuser (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

The good news is that Weyerhaeuser 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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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.