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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.
In contrast to all that, I prefer to spend time on companies like GCP Applied Technologies (NYSE:GCP), which has not only revenues, but also profits. 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.
How Fast Is GCP Applied Technologies Growing Its Earnings Per Share?
In the last three years GCP Applied Technologies's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, GCP Applied Technologies's EPS shot from US$0.75 to US$1.45, over the last year. You don't see 93% year-on-year growth like that, very often.
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. While GCP Applied Technologies may have maintained EBIT margins over the last year, revenue has fallen. And that does make me a little more cautious of the stock.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of GCP Applied Technologies's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are GCP Applied Technologies 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 do note that, in the last year, insiders sold -US$17k worth of shares. But that's far less than the US$1.1m insiders spend purchasing stock. I find this encouraging because it suggests they are optimistic about the GCP Applied Technologies's future. It is also worth noting that it was Director Robert Yanker who made the biggest single purchase, worth US$616k, paying US$15.40 per share.
On top of the insider buying, it's good to see that GCP Applied Technologies insiders have a valuable investment in the business. Indeed, they hold US$21m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add GCP Applied Technologies To Your Watchlist?
GCP Applied Technologies's earnings have taken off like any random crypto-currency did, back in 2017. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe GCP Applied Technologies deserves timely attention. Even so, be aware that GCP Applied Technologies is showing 2 warning signs in our investment analysis , you should know about...
As a growth investor I do like to see insider buying. But GCP Applied Technologies 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.
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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