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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Burlington Stores (NYSE:BURL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Burlington Stores with the means to add long-term value to shareholders.
Burlington Stores' Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Burlington Stores has managed to grow EPS by 31% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. Burlington Stores maintained stable EBIT margins over the last year, all while growing revenue 8.4% to US$11b. 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.
View our latest analysis for Burlington Stores
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Burlington Stores?
Are Burlington Stores Insiders Aligned With All Shareholders?
Owing to the size of Burlington Stores, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. With a whopping US$58m 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 Burlington Stores To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Burlington Stores' strong EPS growth. 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. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. However, before you get too excited we've discovered 3 warning signs for Burlington Stores (1 is a bit unpleasant!) that you should be aware of.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
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.