It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 OGE Energy (NYSE:OGE). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
How Fast Is OGE Energy Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Impressively, OGE Energy has grown EPS by 32% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. It's noted that OGE Energy's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Unfortunately, OGE Energy's revenue dropped 21% last year, but the silver lining is that EBIT margins improved from 15% to 22%. While not disastrous, these figures could be better.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of OGE Energy's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are OGE Energy 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
While OGE Energy insiders did net US$256k selling stock over the last year, they invested US$583k, a much higher figure. You could argue that level of buying implies genuine confidence in the business. Zooming in, we can see that the biggest insider purchase was by Independent Director Luther Kissam for US$264k worth of shares, at about US$35.14 per share.
Along with the insider buying, another encouraging sign for OGE Energy is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$27m. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.4%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Does OGE Energy Deserve A Spot On Your Watchlist?
For growth investors, OGE Energy's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. It is worth noting though that we have found 5 warning signs for OGE Energy (2 make us uncomfortable!) that you need to take into consideration.
Keen growth investors love to see insider buying. Thankfully, OGE Energy 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.
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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.