Investors are often guided by the idea of discovering ‘the next big thing’, even if that means buying ‘story stocks’ without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn’t your style, you like companies that generate revenue, and even earn profits, then you may well be interested in BorgWarner (NYSE:BWA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide BorgWarner with the means to add long-term value to shareholders.
See our latest analysis for BorgWarner
BorgWarner’s Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, BorgWarner has grown EPS by 23% per year, compound, in the last three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be beaming.
It’s often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company’s growth. EBIT margins for BorgWarner remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 15% to US$17b. That’s encouraging news for the company!
You can take a look at the company’s revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of BorgWarner’s forecast profits?
Are BorgWarner Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$9.0b company like BorgWarner. But we are reassured by the fact they have invested in the company. With a whopping US$54m worth of shares as a group, insiders have plenty riding on the company’s success. That’s certainly enough to let shareholders know that management will be very focussed on long term growth.
Should You Add BorgWarner To Your Watchlist?
You can’t deny that BorgWarner has grown its earnings per share at a very impressive rate. That’s attractive. This EPS growth rate is something the company should be proud of, and so it’s no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You should always think about risks though. Case in point, we’ve spotted 1 warning sign for BorgWarner 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.