Yahoo Finance Is Now The Time To Put Ferguson (NYSE:FERG) On Your Watchlist?
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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Ferguson (NYSE:FERG). 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.
View our latest analysis for Ferguson
How Quickly Is Ferguson Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Ferguson has managed to grow EPS by 34% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. While we note Ferguson achieved similar EBIT margins to last year, revenue grew by a solid 16% to US$30b. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Ferguson's future profits.
Are Ferguson Insiders Aligned With All Shareholders?
Owing to the size of Ferguson, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Indeed, they hold US$26m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.08% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Does Ferguson Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Ferguson's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. We don't want to rain on the parade too much, but we did also find 2 warning signs for Ferguson that you need to be mindful of.
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 free list of them here.
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.
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