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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ 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.
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 Green Brick Partners (NYSE:GRBK). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Green Brick Partners with the means to add long-term value to shareholders.
Check out our latest analysis for Green Brick Partners
How Fast Is Green Brick Partners Growing Its Earnings Per Share?
Green Brick Partners has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn’t be a fair assessment of the company’s future. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Green Brick Partners’ EPS catapulted from US$3.08 to US$6.46, over the last year. Year on year growth of 110% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it’s a great way for a company to maintain a competitive advantage in the market. Green Brick Partners shareholders can take confidence from the fact that EBIT margins are up from 16% to 21%, and revenue is growing. That’s great to see, on both counts.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don’t exist, you can check our visualization of consensus analyst forecasts for Green Brick Partners’ future EPS 100% free.
Are Green Brick Partners Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
The first bit of good news is that no Green Brick Partners insiders reported share sales in the last twelve months. But the important part is that Independent Director Harry Brandler spent US$499k buying stock, at an average price of US$19.97. Big buys like that may signal an opportunity; actions speak louder than words.
The good news, alongside the insider buying, for Green Brick Partners bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping US$91m worth of shares as a group, insiders have plenty riding on the company’s success. This would indicate that the goals of shareholders and management are one and the same.
Does Green Brick Partners Deserve A Spot On Your Watchlist?
Green Brick Partners’ earnings per share have been soaring, with growth rates sky high. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company’s potential and that it has reached an inflection point. We’d suggest Green Brick Partners belongs near the top of your watchlist. We should say that we’ve discovered 1 warning sign for Green Brick Partners that you should be aware of before investing here.
The good news is that Green Brick Partners is not the only growth stock with insider buying. Here’s a list of them… 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.
What are the risks and opportunities for Green Brick Partners?
Green Brick Partners, Inc. operates as a homebuilding and land development company in the United States.
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Rewards
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Price-To-Earnings ratio (4.2x) is below the US market (14.8x)
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Earnings grew by 90.7% over the past year
Risks
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Earnings are forecast to decline by an average of 29.5% per year for the next 3 years
View all Risks and Rewards
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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