Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Beacon Roofing Supply (NASDAQ:BECN). 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.
Check out our latest analysis for Beacon Roofing Supply
Beacon Roofing Supply’s Improving Profits
In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Beacon Roofing Supply grew its EPS from US$1.24 to US$4.05, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.
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. Beacon Roofing Supply shareholders can take confidence from the fact that EBIT margins are up from 4.5% to 8.1%, and revenue is growing. That’s great to see, on both counts.
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.
NasdaqGS:BECN Earnings and Revenue History May 29th 2022
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Beacon Roofing Supply’s forecast profits?
Are Beacon Roofing Supply Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Despite -US$143k worth of sales, Beacon Roofing Supply insiders have overwhelmingly been buying the stock, spending US$344k on purchases in the last twelve months. On balance, to me, this signals their optimism. Zooming in, we can see that the biggest insider purchase was by President Julian Francis for US$245k worth of shares, at about US$48.90 per share.
Along with the insider buying, another encouraging sign for Beacon Roofing Supply is that insiders, as a …….