If You Like EPS Growth Then Check Out Baxter International (NYSE:BAX) Before It's Too Late
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Baxter International (NYSE:BAX). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
View our latest analysis for Baxter International
Baxter International's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Baxter International has managed to grow EPS by 24% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Baxter International's EBIT margins were flat over the last year, revenue grew by a solid 2.7% to US$12b. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Baxter International's forecast profits?
Are Baxter International Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
One gleaming positive for Baxter International, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, the Senior VP & General Counsel, Sean B. Martin, accumulated US$804k worth of shares around US$82.19. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.
Along with the insider buying, another encouraging sign for Baxter International is that insiders, as a group, have a considerable shareholding. With a whopping US$58m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.
Does Baxter International Deserve A Spot On Your Watchlist?
For growth investors like me, Baxter International's raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. Before you take the next step you should know about the 2 warning signs for Baxter International that we have uncovered.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Baxter International, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
This article by Simply Wall St is general in nature. 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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