U.S. markets open in 8 hours 48 minutes
  • S&P Futures

    3,929.00
    +31.25 (+0.80%)
     
  • Dow Futures

    31,402.00
    +200.00 (+0.64%)
     
  • Nasdaq Futures

    12,005.75
    +127.50 (+1.07%)
     
  • Russell 2000 Futures

    1,792.80
    +17.90 (+1.01%)
     
  • Crude Oil

    110.85
    -1.36 (-1.21%)
     
  • Gold

    1,841.40
    +0.20 (+0.01%)
     
  • Silver

    21.87
    -0.03 (-0.13%)
     
  • EUR/USD

    1.0573
    -0.0015 (-0.14%)
     
  • 10-Yr Bond

    2.8550
    0.0000 (0.00%)
     
  • Vix

    29.35
    -1.61 (-5.20%)
     
  • GBP/USD

    1.2452
    -0.0023 (-0.18%)
     
  • USD/JPY

    127.6820
    -0.1120 (-0.09%)
     
  • BTC-USD

    30,149.22
    +1,013.71 (+3.48%)
     
  • CMC Crypto 200

    672.06
    +19.83 (+3.04%)
     
  • FTSE 100

    7,302.74
    -135.35 (-1.82%)
     
  • Nikkei 225

    26,711.46
    +308.62 (+1.17%)
     

If You Like EPS Growth Then Check Out Genworth Financial (NYSE:GNW) Before It's Too Late

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Genworth Financial (NYSE:GNW). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Genworth Financial

How Fast Is Genworth Financial 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). That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Genworth Financial's EPS has grown 18% each year, compound, 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.

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. I note that Genworth Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. The good news is that Genworth Financial is growing revenues, and EBIT margins improved by 8.9 percentage points to 19%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
earnings-and-revenue-history

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Genworth Financial Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Genworth Financial insiders have a significant amount of capital invested in the stock. To be specific, they have US$23m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 1.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Genworth Financial To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Genworth Financial's strong EPS growth. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Still, you should learn about the 1 warning sign we've spotted with Genworth Financial .

Although Genworth Financial certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.