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.’ Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.
If this kind of company isn’t your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Apple (NASDAQ:AAPL). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.
See our latest analysis for Apple
How Fast Is Apple 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. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Apple’s EPS has grown 28% each year, compound, over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be beaming.
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. Apple maintained stable EBIT margins over the last year, all while growing revenue 7.9% to US$394b. That’s a real positive.
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.
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 Apple?
Are Apple Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$2.0t company like Apple. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$1.3b. While that is a lot of skin in the game, we note this holding only totals to 0.06% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.
Should You Add Apple To Your Watchlist?
For growth investors, Apple’s raw rate of earnings growth is a beacon in the night. 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. The growth and insider confidence is looked upon well and so it’s worthwhile to investigate further with a view to discern the stock’s true value. You should always think about risks though. Case in point, we’ve spotted 2 warning signs for Apple you should be aware of.
Although Apple certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.
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.
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