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.'
In contrast to all that, I prefer to spend time on companies like Intel (NASDAQ:INTC), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Intel 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). It's no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Intel's EPS has grown 25% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Intel reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Intel EPS 100% free.
Are Intel Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We did see some selling in the last twelve months, but that's insignificant compared to the whopping US$10m that the Independent Director, James Goetz spent acquiring shares. We should note the average purchase price was around US$58.19. Big purchases like that are well worth noting, especially for those who like to follow the insider money.
The good news, alongside the insider buying, for Intel bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping US$88m 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 Intel Deserve A Spot On Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Intel's strong EPS growth. The cranberry sauce on the turkey is that insiders own a bunch of shares, and one has been buying more. So it's fair to say I think this stock may well deserve a spot on your watchlist. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Intel. You might benefit from giving it a glance today.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Intel, 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
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