Yahoo Finance Do NetApp's (NASDAQ:NTAP) 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.' 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 NetApp (NASDAQ:NTAP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide NetApp with the means to add long-term value to shareholders.
Check out our latest analysis for NetApp
How Fast Is NetApp Growing?
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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, NetApp has grown EPS by 12% per year. That's a pretty good rate, if the company can sustain it.
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. EBIT margins for NetApp remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 4.4% to US$6.5b. 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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of NetApp's forecast profits?
Are NetApp Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.
Our analysis into NetApp has shown that insiders have sold US$174k worth of shares over the last 12 months. This falls short of the share acquisition by Executive VP & CFO Michael Berry, who has acquired US$360k worth of shares, at an average price of US$72.04. Overall, that is something good to take away.
On top of the insider buying, it's good to see that NetApp insiders have a valuable investment in the business. To be specific, they have US$41m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 0.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add NetApp To Your Watchlist?
As previously touched on, NetApp is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We should say that we've discovered 1 warning sign for NetApp that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of NetApp, you'll probably love this free list of growing companies that insiders are buying.
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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