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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like EnLink Midstream (NYSE:ENLC), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Fast Is EnLink Midstream Growing Its Earnings Per Share?
In the last three years EnLink Midstream's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, EnLink Midstream's EPS catapulted from US$0.37 to US$0.77, over the last year. Year on year growth of 110% is certainly a sight to behold.
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. Unfortunately, EnLink Midstream's revenue dropped 11% last year, but the silver lining is that EBIT margins improved from 6.4% to 9.1%. That falls short of ideal.
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 EnLink Midstream?
Are EnLink Midstream Insiders Aligned With All Shareholders?
Since EnLink Midstream has a market capitalisation of US$5.7b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. To be specific, they have US$27m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Should You Add EnLink Midstream To Your Watchlist?
EnLink Midstream's earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, EnLink Midstream is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You should always think about risks though. Case in point, we've spotted 3 warning signs for EnLink Midstream you should be aware of, and 1 of them is a bit unpleasant.
Although EnLink Midstream certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.
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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.