Yahoo Finance Does Bread Financial Holdings (NYSE:BFH) Deserve A Spot On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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 Bread Financial Holdings (NYSE:BFH). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Bread Financial Holdings
How Fast Is Bread Financial Holdings Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that Bread Financial Holdings has grown EPS by 51% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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. It's noted that Bread Financial Holdings' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Bread Financial Holdings achieved similar EBIT margins to last year, revenue grew by a solid 37% to US$3.1b. That's encouraging news for the company!
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Bread Financial Holdings' future EPS 100% free.
Are Bread Financial Holdings 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Bread Financial Holdings top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Independent Chairman of the Board, Roger Ballou, paid US$100k to buy shares at an average price of US$41.78. Purchases like this clue us in to the to the faith management has in the business' future.
Should You Add Bread Financial Holdings To Your Watchlist?
Bread Financial Holdings' earnings have taken off in quite an impressive fashion. Growth-minded people will be intrigued by the incredible movement in EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If this these factors intrigue you, then an addition of Bread Financial Holdings to your watchlist won't go amiss. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Bread Financial Holdings (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
Keen growth investors love to see insider buying. Thankfully, Bread Financial Holdings isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by 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.
