Yahoo Finance If EPS Growth Is Important To You, EnerSys (NYSE:ENS) Presents An Opportunity
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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 EnerSys (NYSE:ENS). 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 EnerSys
EnerSys' Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. EnerSys' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 39%. 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. While revenue is looking a bit flat, the good news is EBIT margins improved by 4.4 percentage points to 11%, in the last twelve months. That's something to smile about.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of EnerSys' forecast profits?
Are EnerSys 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. EnerSys followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have US$33m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Does EnerSys Deserve A Spot On Your Watchlist?
EnerSys' earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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, EnerSys is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Now, you could try to make up your mind on EnerSys by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.
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.
