We Ran A Stock Scan For Earnings Growth And Ennis (NYSE:EBF) 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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Ennis (NYSE:EBF). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ennis with the means to add long-term value to shareholders.
Check out our latest analysis for Ennis
How Fast Is Ennis Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. We can see that in the last three years Ennis grew its EPS by 16% per year. That's a good rate of growth, if it can be sustained.
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. Ennis maintained stable EBIT margins over the last year, all while growing revenue 2.2% to US$431m. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Ennis Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We haven't seen any insiders selling Ennis shares, in the last year. With that in mind, it's heartening that Daniel Gus, the General Counsel & Secretary of the company, paid US$38k for shares at around US$19.19 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Ennis.
Along with the insider buying, another encouraging sign for Ennis is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$18m worth of its stock. This considerable investment should help drive long-term value in the business. Despite being just 3.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Does Ennis Deserve A Spot On Your Watchlist?
One positive for Ennis is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Of course, just because Ennis is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Keen growth investors love to see insider buying. Thankfully, Ennis 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.
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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.
