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Here's Why Louisiana-Pacific (NYSE:LPX) Has Caught The Eye Of Investors

·4 min read

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Louisiana-Pacific (NYSE:LPX). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Louisiana-Pacific with the means to add long-term value to shareholders.

View our latest analysis for Louisiana-Pacific

How Fast Is Louisiana-Pacific Growing Its Earnings Per Share?

Louisiana-Pacific has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Louisiana-Pacific's EPS soared from US$11.62 to US$18.17, over the last year. That's a fantastic gain of 56%. EPS has grown further thank to a share buyback. A great indicator of a healthy balance sheet.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While Louisiana-Pacific did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Louisiana-Pacific's forecast profits?

Are Louisiana-Pacific 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. 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.

The first bit of good news is that no Louisiana-Pacific insiders reported share sales in the last twelve months. But the important part is that Chairman & CEO William Southern spent US$360k buying stock, at an average price of US$67.24. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.

The good news, alongside the insider buying, for Louisiana-Pacific bulls is that insiders (collectively) have a meaningful investment in the stock. Given insiders own a significant chunk of shares, currently valued at US$65m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Is Louisiana-Pacific Worth Keeping An Eye On?

For growth investors, Louisiana-Pacific'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. Astute investors will want to keep this stock on watch. It is worth noting though that we have found 2 warning signs for Louisiana-Pacific (1 shouldn't be ignored!) that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Louisiana-Pacific 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.

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.

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