Yahoo Finance Do Puma Biotechnology's (NASDAQ:PBYI) Earnings Warrant Your Attention?
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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like Puma Biotechnology (NASDAQ:PBYI), which has not only revenues, but also profits. 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 Puma Biotechnology
How Fast Is Puma Biotechnology Growing Its Earnings Per Share?
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. Which is why EPS growth is looked upon so favourably. It is awe-striking that Puma Biotechnology's EPS went from US$0.000044 to US$0.45 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future.
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. Puma Biotechnology maintained stable EBIT margins over the last year, all while growing revenue 3.3% to US$236m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed 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 Puma Biotechnology's future EPS 100% free.
Are Puma Biotechnology Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Puma Biotechnology insiders have a significant amount of capital invested in the stock. To be specific, they have US$34m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 15% of the shares on issue for the business, an appreciable amount considering the market cap.
Should You Add Puma Biotechnology To Your Watchlist?
Puma Biotechnology's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Puma Biotechnology is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Before you take the next step you should know about the 3 warning signs for Puma Biotechnology (1 is significant!) that we have uncovered.
Although Puma Biotechnology certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen 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.
