With EPS Growth And More, Trinity Industries (NYSE:TRN) Makes An Interesting Case
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
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 Trinity Industries (NYSE:TRN). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for Trinity Industries
How Fast Is Trinity Industries Growing Its Earnings Per Share?
Over the last three years, Trinity Industries 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. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Trinity Industries' EPS shot from US$0.63 to US$1.16, over the last year. Year on year growth of 84% is certainly a sight to behold. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for Trinity Industries remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 38% to US$2.5b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Trinity Industries?
Are Trinity Industries 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
It's good to see Trinity Industries insiders walking the walk, by spending US$295k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. We also note that it was the President, E. Savage, who made the biggest single acquisition, paying US$100k for shares at about US$22.29 each.
Along with the insider buying, another encouraging sign for Trinity Industries is that insiders, as a group, have a considerable shareholding. To be specific, they have US$24m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 1.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Is Trinity Industries Worth Keeping An Eye On?
Trinity Industries' earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Trinity Industries deserves timely attention. What about risks? Every company has them, and we've spotted 3 warning signs for Trinity Industries (of which 1 doesn't sit too well with us!) you should know about.
Keen growth investors love to see insider buying. Thankfully, Trinity Industries 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.
