If EPS Growth Is Important To You, Landsea Homes (NASDAQ:LSEA) Presents An Opportunity
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Landsea Homes (NASDAQ:LSEA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Landsea Homes with the means to add long-term value to shareholders.
Check out our latest analysis for Landsea Homes
How Fast Is Landsea Homes Growing Its Earnings Per Share?
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. Commendations have to be given in seeing that Landsea Homes grew its EPS from US$0.59 to US$2.06, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.
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. Landsea Homes shareholders can take confidence from the fact that EBIT margins are up from 5.5% to 11%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Landsea Homes' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Landsea Homes 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
It's pleasing to note that insiders spent US$2.1m buying Landsea Homes shares, over the last year, without reporting any share sales whatsoever. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. It is also worth noting that it was CEO & Director John Ho who made the biggest single purchase, worth US$507k, paying US$8.01 per share.
On top of the insider buying, it's good to see that Landsea Homes insiders have a valuable investment in the business. To be specific, they have US$38m worth of shares. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 13% of the shares on issue for the business, an appreciable amount considering the market cap.
Is Landsea Homes Worth Keeping An Eye On?
Landsea Homes' earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Landsea Homes belongs near the top of your watchlist. What about risks? Every company has them, and we've spotted 3 warning signs for Landsea Homes (of which 2 make us uncomfortable!) you should know about.
Keen growth investors love to see insider buying. Thankfully, Landsea Homes 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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