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Should You Be Adding National Australia Bank (ASX:NAB) 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 currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like National Australia Bank (ASX:NAB). 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.

Check out our latest analysis for National Australia Bank

How Fast Is National Australia Bank Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. It's good to see that National Australia Bank's EPS has grown from AU$1.96 to AU$2.25 over twelve months. This amounts to a 15% gain; a figure that shareholders will be pleased to see.

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It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Our analysis has highlighted that National Australia Bank's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note National Australia Bank achieved similar EBIT margins to last year, revenue grew by a solid 8.9% to AU$18b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
earnings-and-revenue-history

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

Are National Australia Bank Insiders Aligned With All Shareholders?

Owing to the size of National Australia Bank, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. To be specific, they have AU$33m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 0.03% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does National Australia Bank Deserve A Spot On Your Watchlist?

One positive for National Australia Bank is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. What about risks? Every company has them, and we've spotted 2 warning signs for National Australia Bank (of which 1 can't be ignored!) you should know about.

Although National Australia Bank certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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