We Ran A Stock Scan For Earnings Growth And Tower (NZSE:TWR) Passed With Ease
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. 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 Tower (NZSE:TWR). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.
In the last three years Tower's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Tower's EPS shot from NZ$0.10 to NZ$0.26, over the last year. It's not often a company can achieve year-on-year growth of 152%.
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. The good news is that Tower is growing revenues, and EBIT margins improved by 10.8 percentage points to 21%, over the last year. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Check out our latest analysis for Tower
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Tower.
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The first bit of good news is that no Tower insiders reported share sales in the last twelve months. Even better, though, is that the company insider, Blair Turnbull, bought a whopping NZ$429k worth of shares, paying about NZ$1.48 per share, on average. Big buys like that may signal an opportunity; actions speak louder than words.
Tower's earnings have taken off in quite an impressive fashion. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And may very well signal a significant inflection point for the business. If this is the case, then keeping a watch over Tower could be in your best interest. We should say that we've discovered 2 warning signs for Tower (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Tower, you'll probably love this curated collection of companies in NZ that have an attractive valuation alongside insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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