Should You Be Adding Genesis Energy (NZSE:GNE) To Your Watchlist Today?
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 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Genesis Energy (NZSE:GNE). 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 Genesis Energy
Genesis Energy's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Genesis Energy has achieved impressive annual EPS growth of 53%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
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. Despite consistency in EBIT margins year on year, Genesis Energy has actually recorded a dip in revenue. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
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 Genesis Energy's future EPS 100% free.
Are Genesis Energy Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
In the last twelve months Genesis Energy insiders spent NZ$15k on stock; good news for shareholders. While this investment may be modest, it is great considering the lack of insider selling.
Should You Add Genesis Energy To Your Watchlist?
Genesis Energy's earnings per share growth have been climbing higher at an appreciable rate. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If that's the case, you may regret neglecting to put Genesis Energy on your watchlist. Still, you should learn about the 3 warning signs we've spotted with Genesis Energy (including 2 which shouldn't be ignored).
Keen growth investors love to see insider buying. Thankfully, Genesis Energy isn't the only one. You can see a 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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