We Ran A Stock Scan For Earnings Growth And Installed Building Products (NYSE:IBP) Passed With Ease
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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Installed Building Products (NYSE:IBP). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Installed Building Products
How Fast Is Installed Building Products Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that Installed Building Products has grown EPS by 43% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
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. EBIT margins for Installed Building Products remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 34% to US$2.5b. That's a real positive.
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 Installed Building Products.
Are Installed Building Products Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Installed Building Products followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$424m. This totals to 18% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Looking very optimistic for investors.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between US$1.0b and US$3.2b, like Installed Building Products, the median CEO pay is around US$5.5m.
Installed Building Products' CEO took home a total compensation package worth US$4.4m in the year leading up to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Installed Building Products Deserve A Spot On Your Watchlist?
Installed Building Products' earnings have taken off in quite an impressive fashion. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Installed Building Products certainly ticks a few boxes, so we think it's probably well worth further consideration. It is worth noting though that we have found 3 warning signs for Installed Building Products (1 makes us a bit uncomfortable!) that you need to take into consideration.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
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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