The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Linamar (TSE:LNR). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.
View our latest analysis for Linamar
How Fast Is Linamar Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Linamar managed to grow EPS by 7.9% per year, over three years. While that sort of growth rate isn’t anything to write home about, it does show the business is growing.
One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Linamar achieved similar EBIT margins to last year, revenue grew by a solid 29% to CA$8.4b. That’s progress.
The chart below shows how the company’s bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Fortunately, we’ve got access to analyst forecasts of Linamar’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Linamar Insiders Aligned With All Shareholders?
It’s a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own Linamar shares worth a considerable sum. Notably, they have an enviable stake in the company, worth CA$1.4b. That equates to 34% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Does Linamar Deserve A Spot On Your Watchlist?
One important encouraging feature of Linamar is that it is growing profits. If that’s not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. However, before you get too excited we’ve discovered 2 warning signs for Linamar (1 is a bit concerning!) that you should be aware of.
There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.
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