If EPS Growth Is Important To You, Westwood Holdings Group (NYSE:WHG) 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.
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 Westwood Holdings Group (NYSE:WHG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Westwood Holdings Group with the means to add long-term value to shareholders.
View our latest analysis for Westwood Holdings Group
Westwood Holdings Group's Earnings Per Share Are Growing
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) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Westwood Holdings Group has achieved impressive annual EPS growth of 39%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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 Westwood Holdings Group achieved similar EBIT margins to last year, revenue grew by a solid 29% to US$87m. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Since Westwood Holdings Group is no giant, with a market capitalisation of US$100m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Westwood Holdings Group Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Westwood Holdings Group shares worth a considerable sum. As a matter of fact, their holding is valued at US$17m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 17% of the shares on issue for the business, an appreciable amount considering the market cap.
Does Westwood Holdings Group Deserve A Spot On Your Watchlist?
Westwood Holdings Group's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. 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 at the surface level, Westwood Holdings Group is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You should always think about risks though. Case in point, we've spotted 3 warning signs for Westwood Holdings Group you should be aware of, and 1 of them is concerning.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.
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.
