With EPS Growth And More, Spin Master (TSE:TOY) Makes An Interesting Case
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies with no revenue, no profit and a history of failure can successfully find investors. But as Peter Lynch said in One Up on Wall Street, “Long shots almost never pay off.” Although a well-funded business may suffer losses for years, it will eventually have to turn a profit or investors will move on and the business will wither away.
Despite being in the age of astronomical investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like Spin Master (TSE: TOY). This does not mean that the company presents the best investment opportunity, but profitability is a key element of business success.
See our latest review for Spin Master
How fast is Spin Master growing?
If a company can keep increasing its earnings per share (EPS) long enough, its stock price should eventually follow. Therefore, there are many investors who like to buy shares in companies that grow EPS. Spin Master shareholders have reason to celebrate as their annual EPS growth over the past 3 years has been 39%. Such rapid growth may well be fleeting, but it should be more than enough to pique the interest of wary stock pickers.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. Spin Master shareholders can be confident that EBIT margins have increased from 11% to 17% and revenue is growing. Checking both of these boxes is a good sign of growth, in our book.
You can check the company’s revenue and profit growth trend in the table below. For more details, click on the image.
Luckily, we have access to analyst forecasts from Spin Master coming profits. You can make your own predictions without looking, or you can take a peek at what the pros are predicting.
Are Spin Master insiders aligned with all shareholders?
Many consider high insider shareholding to be a strong sign of alignment between a company’s executives and ordinary shareholders. So we are happy to report that Spin Master insiders own a significant share of the business. In fact, they own 40% of the shares, making insiders a very influential group of shareholders. Shareholders and speculators should be reassured by this type of alignment, as it suggests that the company will be run for the benefit of shareholders. And their stake is extremely valuable at the current share price, totaling US$1.9 billion. This means that they have a lot of their own capital depending on the performance of the business!
Should you add Spin Master to your watchlist?
Spin Master’s earnings per share growth has increased at an appreciable pace. This EPS growth is certainly getting attention, and the large insider ownership only serves to further pique our interest. Sometimes rapid EPS growth is a sign that the business has reached an inflection point, so there is a potential opportunity here. So at the surface level, Spin Master is worth putting on your watch list; after all, shareholders succeed when the market undervalues fast-growing companies. Before proceeding to the next step, you must know the 1 warning sign for Spin Master that we discovered.
There is always the possibility of doing well by buying stocks that are not increased income and not have insiders buying stocks. But for those who consider these measures important, we encourage you to check out the companies that do have these characteristics. You can access a free list of them here.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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