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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Brinker International (NYSE:EAT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Brinker International with the means to add long-term value to shareholders.
Brinker International’s Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Brinker International’s EPS has grown 22% each year, compound, over three years. If the company can sustain that sort of growth, we’d expect shareholders to come away satisfied.
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. Brinker International shareholders can take confidence from the fact that EBIT margins are up from 5.6% to 8.5%, 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. For finer detail, click on the image.
Fortunately, we’ve got access to analyst forecasts of Brinker International’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Brinker International Insiders Aligned With All Shareholders?
Since Brinker International has a market capitalisation of US$6.2b, we wouldn’t expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it’s pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$110m. This suggests that leadership will be very mindful of shareholders’ interests when making decisions!
Should You Add Brinker International To Your Watchlist?
You can’t deny that Brinker International has grown its earnings per share at a very impressive rate. That’s attractive. 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. We don’t want to rain on the parade too much, but we did also find 2 warning signs for Brinker International that you need to be mindful of.
There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.