For newbies, it might seem like a good idea (and an exciting prospect) to buy a business that tells investors a good story, even if it lacks a history of revenue and profit altogether. But the reality is that when a business loses money every year, for long enough, its investors will usually take their share of those losses.
If, on the other hand, you like businesses that have revenue, and even profits, then you might be interested in PennyMac Financial Services (NYSE: PFSI). While profit isn’t necessarily social good, it’s easy to admire a business that can consistently produce it. Loss-making businesses always race against time to achieve financial viability, but time is often the friend of the profitable business, especially if it is growing.
Check out our latest review for PennyMac Financial Services
How fast is PennyMac Financial Services increasing its earnings per share?
Over the past three years, PennyMac Financial Services earnings per share have taken off like a rocket; fast, and from a low base. So the real growth rate doesn’t tell us much. So it makes sense to focus on more recent growth rates instead. As the last New Year’s Eve fireworks display accelerating across the sky, PennyMac Financial Services’ EPS has fallen from US $ 11.91 to US $ 25.28 in the past year. 112% annual growth is certainly a sight to behold.
I like to see top line growth as an indication that growth is sustainable, and I look for a high profit margin before interest and taxes (EBIT) to indicate a competitive gap (although some low-margin companies also have ditches). Not all of PennyMac Financial Services’ revenue last year was operating incomeSo keep in mind that the revenue and margin numbers I used might not be the best representation of the underlying business. PennyMac Financial Services has maintained stable EBIT margins over the past year, while increasing revenues 3.7% to US $ 4.2 billion. It is progress.
You can check out the revenue and profit growth trend of the company in the chart below. Click on the graph to see the exact numbers.
Fortunately, we have access to analyst forecasts from PennyMac Financial Services future profits. You can make your own predictions without looking, or you can take a look at what the pros are predicting.
Are PennyMac Financial Services Insiders Aligned With All Shareholders?
I feel more secure owning shares in a company if insiders also own shares, thereby aligning our interests more closely. So it’s good to see that PennyMac Financial Services insiders have a significant amount of capital invested in the stock. In particular, they own a huge stake in the company, worth US $ 853 million. With 21% of the activity, this participation gives insiders a lot of influence and many reasons to generate value for the shareholders. It may be my imagination, but I feel the glimmer of an opportunity.
Should You Add PennyMac Financial Services To Your Watchlist?
PennyMac Financial Services earnings per share growth increased, like a mountain goat climbing the Alps. This type of growth is simply eye-catching, and the large investment held by insiders certainly informs my vision for the business. Sometimes the rapid growth of BPA is a sign that the business has reached an inflection point; and I like those. So yes, on this short review, I think it’s worth considering PennyMac Financial Services for a place on your watch list. We don’t want to rain too much on the parade, but we also found 2 warning signs for PennyMac financial services that you need to be aware of.
You can invest in any business. But if you’d rather focus on stocks that have demonstrated insider buying, here’s a list of companies that have made insider buying in the past three months.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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