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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Lumber Liquidators Holdings (NYSE:LL). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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.
Lumber Liquidators Holdings's Improving Profits
Over the last three years, Lumber Liquidators Holdings has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Lumber Liquidators Holdings's EPS shot from US$1.12 to US$2.38, over the last year. Year on year growth of 112% is certainly a sight to behold.
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. Lumber Liquidators Holdings shareholders can take confidence from the fact that EBIT margins are up from 3.5% to 7.0%, and revenue is growing. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Lumber Liquidators Holdings's future profits.
Are Lumber Liquidators Holdings 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
In the last year insider at Lumber Liquidators Holdings were both selling and buying shares; but happily, as a group they spent US$79k more on stock, than they netted from selling it. Although I don't particularly like to see selling, the fact that they put more capital in, than they extracted, is a positive in my mind. Zooming in, we can see that the biggest insider purchase was by Independent Director Joseph Nowicki for US$150k worth of shares, at about US$23.94 per share.
The good news, alongside the insider buying, for Lumber Liquidators Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$15m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 2.9% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add Lumber Liquidators Holdings To Your Watchlist?
Lumber Liquidators Holdings's earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Lumber Liquidators Holdings deserves timely attention. You should always think about risks though. Case in point, we've spotted 2 warning signs for Lumber Liquidators Holdings you should be aware of, and 1 of them shouldn't be ignored.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Lumber Liquidators Holdings, 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. 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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