We Ran A Stock Scan For Earnings Growth And United Parcel Service (NYSE:UPS) Passed With Ease
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like United Parcel Service (NYSE:UPS), which has not only revenues, but also profits. 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.
Check out our latest analysis for United Parcel Service
How Quickly Is United Parcel Service Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that United Parcel Service has managed to grow EPS by 32% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of United Parcel Service shareholders is that EBIT margins have grown from 8.8% to 14% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for United Parcel Service.
Are United Parcel Service Insiders Aligned With All Shareholders?
Owing to the size of United Parcel Service, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$115m. This comes in at 0.08% of shares in the company, which is a fair amount of a business of this size. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.
Is United Parcel Service Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into United Parcel Service's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. You still need to take note of risks, for example - United Parcel Service has 2 warning signs we think you should be aware of.
The beauty of investing is that you can invest in almost 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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