Yahoo Finance I Ran A Stock Scan For Earnings Growth And boohoo group (LON:BOO) Passed With Ease
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like boohoo group (LON:BOO). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Check out our latest analysis for boohoo group
How Quickly Is boohoo group Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that boohoo group has grown EPS by 38% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.
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 we note boohoo group's EBIT margins were flat over the last year, revenue grew by a solid 41% to UK£1.7b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of boohoo group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are boohoo group Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The good news is that boohoo group insiders spent a whopping UK£1.5m on stock in just one year, and I didn't see any selling. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. Zooming in, we can see that the biggest insider purchase was by Co-Founder & Group Executive Chairman Mahmud Kamani for UK£729k worth of shares, at about UK£2.43 per share.
On top of the insider buying, it's good to see that boohoo group insiders have a valuable investment in the business. Indeed, they have a glittering mountain of wealth invested in it, currently valued at UK£649m. That equates to 20% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.
Does boohoo group Deserve A Spot On Your Watchlist?
boohoo group's earnings have taken off like any random crypto-currency did, back in 2017. What's more insiders own a significant stake in the company and have been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest boohoo group belongs on the top of your watchlist. Still, you should learn about the 3 warning signs we've spotted with boohoo group (including 1 which is a bit unpleasant) .
There are plenty of other companies that have insiders buying up shares. So if you like the sound of boohoo group, 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.
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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