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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like SYNNEX (NYSE:SNX), which has not only revenues, but also profits. While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Quickly Is SYNNEX 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, SYNNEX has grown EPS by 16% per year. That’s a good rate of growth, if it can be sustained.
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. SYNNEX maintained stable EBIT margins over the last year, all while growing revenue 15% to US$21b. That’s progress.
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 SYNNEX’s future profits.
Are SYNNEX Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$5.5b company like SYNNEX. But we do take comfort from the fact that they are investors in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$106m. This suggests to me that leadership will be very mindful of shareholders’ interests when making decisions!
Should You Add SYNNEX To Your Watchlist?
As I already mentioned, SYNNEX is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I’d consider keeping the company on a watchlist. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if SYNNEX is trading on a high P/E or a low P/E, relative to its industry.
Although SYNNEX 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
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