Yahoo Finance Do Build-A-Bear Workshop's (NYSE:BBW) Earnings Warrant Your Attention?
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.' 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 Build-A-Bear Workshop (NYSE:BBW). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for Build-A-Bear Workshop
How Quickly Is Build-A-Bear Workshop Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Build-A-Bear Workshop's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 44%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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. Build-A-Bear Workshop maintained stable EBIT margins over the last year, all while growing revenue 3.8% to US$486m. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Build-A-Bear Workshop's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Build-A-Bear Workshop Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Build-A-Bear Workshop shares worth a considerable sum. As a matter of fact, their holding is valued at US$32m. This considerable investment should help drive long-term value in the business. Those holdings account for over 8.4% of the company; visible skin in the game.
Is Build-A-Bear Workshop Worth Keeping An Eye On?
Build-A-Bear Workshop's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Build-A-Bear Workshop is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Build-A-Bear Workshop is showing 2 warning signs in our investment analysis , you should know about...
Although Build-A-Bear Workshop certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider buying..
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.
