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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like NOV (NYSE:NOV). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide NOV with the means to add long-term value to shareholders.
How Fast Is NOV Growing Its Earnings Per Share?
NOV has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, NOV's EPS grew from US$0.85 to US$2.49, over the previous 12 months. Year on year growth of 195% is certainly a sight to behold.
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. The music to the ears of NOV shareholders is that EBIT margins have grown from 6.3% to 8.4% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of NOV's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are NOV Insiders Aligned With All Shareholders?
Owing to the size of NOV, 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. As a matter of fact, their holding is valued at US$43m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add NOV To Your Watchlist?
NOV's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering NOV for a spot on your watchlist. We should say that we've discovered 2 warning signs for NOV (1 doesn't sit too well with us!) that you should be aware of before investing here.
Although NOV certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.
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.