If EPS Growth Is Important To You, JAKKS Pacific (NASDAQ:JAKK) 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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like JAKKS Pacific (NASDAQ:JAKK). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide JAKKS Pacific with the means to add long-term value to shareholders.
View our latest analysis for JAKKS Pacific
How Fast Is JAKKS Pacific Growing Its Earnings Per Share?
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that JAKKS Pacific grew its EPS from US$1.51 to US$8.97, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. This could point to the business hitting a point of inflection.
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. While we note JAKKS Pacific achieved similar EBIT margins to last year, revenue grew by a solid 19% to US$783m. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, 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 JAKKS Pacific's forecast profits?
Are JAKKS Pacific 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 JAKKS Pacific insiders have a significant amount of capital invested in the stock. To be specific, they have US$49m worth of shares. This considerable investment should help drive long-term value in the business. Those holdings account for over 22% of the company; visible skin in the game.
Should You Add JAKKS Pacific To Your Watchlist?
JAKKS Pacific's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering JAKKS Pacific for a spot on your watchlist. You still need to take note of risks, for example - JAKKS Pacific has 2 warning signs (and 1 which doesn't sit too well with us) we think 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.
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