With EPS Growth And More, Lamb Weston Holdings (NYSE:LW) Makes An Interesting Case
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Lamb Weston Holdings (NYSE:LW). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Lamb Weston Holdings
How Quickly Is Lamb Weston Holdings Increasing Earnings Per Share?
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. That means EPS growth is considered a real positive by most successful long-term investors. Recognition must be given to the that Lamb Weston Holdings has grown EPS by 56% per year, 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. The music to the ears of Lamb Weston Holdings shareholders is that EBIT margins have grown from 15% to 18% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
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 Lamb Weston Holdings' future EPS 100% free.
Are Lamb Weston Holdings Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
First things first, there weren't any reports of insiders selling shares in Lamb Weston Holdings in the last 12 months. Even better, though, is that the Independent Non-Executive Chairman, William Jurgensen, bought a whopping US$253k worth of shares, paying about US$84.35 per share, on average. Big buys like that may signal an opportunity; actions speak louder than words.
Along with the insider buying, another encouraging sign for Lamb Weston Holdings is that insiders, as a group, have a considerable shareholding. Holding US$81m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
Should You Add Lamb Weston Holdings To Your Watchlist?
Lamb Weston Holdings' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Lamb Weston Holdings deserves timely attention. Before you take the next step you should know about the 2 warning signs for Lamb Weston Holdings (1 can't be ignored!) that we have uncovered.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Lamb Weston Holdings, you'll probably love this curated collection of companies in the US that have witnessed growth alongside 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.
