Do NetApp's (NASDAQ:NTAP) Earnings Warrant Your Attention?
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. 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in NetApp (NASDAQ:NTAP). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 NetApp
How Fast Is NetApp Growing Its Earnings Per Share?
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that NetApp grew its EPS from US$0.43 to US$4.60, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.
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. The good news is that NetApp is growing revenues, and EBIT margins improved by 3.4 percentage points to 19%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
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 NetApp's future profits.
Are NetApp Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$14b company like NetApp. But we are reassured by the fact they have invested in the company. To be specific, they have US$36m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 0.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add NetApp To Your Watchlist?
NetApp's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind NetApp is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. 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 NetApp. You might benefit from giving it a glance today.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
