If EPS Growth Is Important To You, Douglas Dynamics (NYSE:PLOW) Presents An Opportunity
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 Douglas Dynamics (NYSE:PLOW). 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.
View our latest analysis for Douglas Dynamics
Douglas Dynamics' Improving Profits
Over the last three years, Douglas Dynamics has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that Douglas Dynamics' EPS has grown from US$1.27 to US$1.52 over twelve months. That's a 20% gain; respectable growth in the broader scheme of things.
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. Douglas Dynamics maintained stable EBIT margins over the last year, all while growing revenue 7.9% to US$616m. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Douglas Dynamics' forecast profits?
Are Douglas Dynamics Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Douglas Dynamics insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at US$20m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 2.6%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Does Douglas Dynamics Deserve A Spot On Your Watchlist?
One positive for Douglas Dynamics is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Douglas Dynamics (of which 1 makes us a bit uncomfortable!) you should know about.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
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.
