Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you're like me, you might be more interested in profitable, growing companies, like BHP Group (ASX:BHP). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
How Quickly Is BHP Group Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. It certainly is nice to see that BHP Group has managed to grow EPS by 23% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that BHP Group is growing revenues, and EBIT margins improved by 11.0 percentage points to 50%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of BHP Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are BHP Group Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a AU$233b company like BHP Group. But we are reassured by the fact they have invested in the company. To be specific, they have US$50m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.02% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Is BHP Group Worth Keeping An Eye On?
For growth investors like me, BHP Group's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for BHP Group (1 can't be ignored) you should be aware of.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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