I ran a stock analysis for earnings growth and United Parcel Service (NYSE:UPS) passed with ease
It’s only natural that many investors, especially those new to the game, prefer to buy stocks in “sexy” stocks with a good history, even if those companies are losing money. But the reality is that when a company loses money every year, for long enough, its investors will usually take their share of those losses.
In the era of blue-sky tech-stock investments, my choice may seem old-fashioned; I always prefer profitable companies like United Parcel Service (NYSE:UPS). Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. Conversely, a loss-making business has yet to prove itself with profits, and eventually the sweet milk of outside capital can turn sour.
Check out our latest analysis for United Parcel Service
How fast is United Parcel Service growing?
The market is a short-term voting machine, but a long-term weighing machine, so stock price eventually follows earnings per share (EPS). Therefore, there are many investors who like to buy shares in companies that grow EPS. Who among us wouldn’t applaud United Parcel Service’s stratospheric annual EPS growth of 39%, compounded, over the past three years? This kind of growth never lasts long, but like a shooting star, it’s worth watching when it happens.
I like to take a look at earnings before interest and tax margins (EBIT), as well as revenue growth, to get another view of the quality of the company’s growth. United Parcel Service shareholders can take comfort in the fact that EBIT margins have increased from 2.5% to 17% and revenues are increasing. It’s great to see, on both counts.
The chart below shows how the company’s top and bottom line has grown over time. For more details, click on the image.
You don’t drive with your eyes on the rearview mirror, so you might be more interested in that free report showing analyst forecasts for United Parcel Service future profits.
Are United Parcel Service insiders aligned with all shareholders?
Like standing on the lookout, surveying the horizon at sunrise, insider buying, for some investors, brings joy. Indeed, insider buying often indicates that those closest to the company are confident that the stock price will perform well. However, insiders are sometimes wrong and we don’t know the exact logic behind their acquisitions.
Like a strong phalanx, United Parcel Service insiders have remained united in refusing to sell stock over the past year. But the biggest problem is that the , Russell Stokes, paid US$77,000 to buy shares at an average price of US$192.
The good news, alongside insider buying, for United Parcel Service bulls is that insiders (collectively) have a significant investment in the stock. Indeed, they have invested a mountain of glittering wealth there, currently valued at US$134 million. This suggests to me that management will be very mindful of shareholder interests when making decisions!
Is United Parcel Service worth watching?
United Parcel Service’s earnings per share took off like a rocket aimed straight at the moon. The icing on the cake is that insiders own a large part of the company and one of them even bought more shares. Due to the possibility that it has reached an inflection point, I would say that United Parcel Service belongs to the High from your watch list. What about the risks? Every business has them, and we’ve spotted 2 warning signs for United Parcel Service (of which 1 is significant!) that you should know.
The good news is that United Parcel Service isn’t the only growth stock to buy insiders. Here’s a list…with insider purchases over the past three months!
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.