Here's Why I Think Preformed Line Products (NASDAQ:PLPC) Is An Interesting Stock
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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 Preformed Line Products (NASDAQ:PLPC). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Check out our latest analysis for Preformed Line Products
How Fast Is Preformed Line Products Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Preformed Line Products has grown EPS by 26% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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 we note Preformed Line Products's EBIT margins were flat over the last year, revenue grew by a solid 5.7% to US$462m. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Preformed Line Products 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.
It's good to see Preformed Line Products insiders walking the walk, by spending US$215k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. We also note that it was the Chief Financial Officer, Andrew Klaus, who made the biggest single acquisition, paying US$192k for shares at about US$51.15 each.
On top of the insider buying, we can also see that Preformed Line Products insiders own a large chunk of the company. Actually, with 48% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have US$162m invested in the business, using the current share price. That's nothing to sneeze at!
Is Preformed Line Products Worth Keeping An Eye On?
For growth investors like me, Preformed Line Products'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. So I do think this is one stock worth watching. However, before you get too excited we've discovered 1 warning sign for Preformed Line Products that you should be aware of.
The good news is that Preformed Line Products is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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. 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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