Like a puppy chasing its tail, some new investors often chase “the next big thing,” even if that means buying “story stocks” with no revenue, let alone making a profit. But as Peter Lynch said on One Up On Wall Street, “Long shots almost never pay off.”
In the age of blue sky investing in tech stocks, my choice may seem old-fashioned; I still prefer profitable companies like Goose head insurance (NASDAQ: GSHD). While that doesn’t make stocks worth at any cost, there is no denying that successful capitalism ultimately requires profit. In comparison, loss-making businesses act like a sponge for capital – but, unlike a sponge, they don’t always produce something when squeezed.
Check out our latest analysis for Goosehead Insurance
How fast is Goosehead Insurance’s earnings per share growing?
For the past three years, Goosehead Insurance has increased earnings per share (EPS) like young bamboo after rain; fast and from a low base. So I don’t think the percentage growth rate is particularly meaningful. Because of this, I’ll zoom in on last year’s growth instead. Like a firework through the night sky, Goosehead Insurance’s earnings per share shot from $ 0.22 to $ 0.40 last year. Such a year-on-year growth of 81% is not seen very often. The best scenario? That the business has reached a true turning point.
I like to see sales growth as a sign of sustainable growth and look for a high margin before interest and tax (EBIT) to indicate a competitive advantage (although some low margin companies also have competitive advantages). While Goosehead Insurance’s EBIT margins were flat over the past year, sales rose a solid 60% to $ 135 million. That is progress.
In the graph below, you can see how the company has grown revenue and revenue over time. For finer details click on the picture.
Fortunately, we have access to analyst forecast on Goosehead Insurance’s future earnings. You can make your own predictions without looking, or look at the predictions made by the professionals.
The story goes on
Do Goosehead Insurance Insiders agree with all shareholders?
I like it when company directors have some skin in the game, so to speak, because it better aligns the incentives between the people who run the company and its real owners. Hence, it’s good to see that Goosehead Insurance insiders have invested a significant amount of capital in the stock. Given that insiders have small fortunes in stocks, currently valued at $ 85 million, they have a lot of motivation to make the business a success. This should focus them on creating long-term value for shareholders.
Does Goosehead Insurance deserve a place on your watchlist?
Goosehead Insurance’s earnings per share were launched like a rocket straight to the moon. This EPS growth is sure to get my attention, and the large inside stake is just to fuel my interest. Sometimes rapid EPS growth is a sign that the business has reached a tipping point; and i like them. So yes, in this brief analysis, I think it is worth considering Goosehead Insurance for a place on your watchlist. It is still necessary to consider the ubiquitous specter of investment risk. We have identified 4 warning signs with Goosehead Insurance (at least 1 which is a bit awkward) and understanding these should be part of your investment process.
While Goosehead Insurance certainly looks good to me, I’d rather it if insiders bought stocks. If you want to see inside buying as well, this is it free Growing Company List Buying Insider Might Be Just What You Are Looking For.
Please note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamentals. Note that our analysis may not take into account the latest company announcements or quality material, which may be sensitive to the price. Simply Wall St has no position in the stocks mentioned.
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