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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. 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 Worthington Steel (NYSE:WS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Worthington Steel with the means to add long-term value to shareholders.
Check out our latest analysis for Worthington Steel
How Fast Is Worthington Steel Growing Its Earnings Per Share?
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's no surprise that some investors are more inclined to invest in profitable businesses. It's good to see that Worthington Steel's EPS has grown from US$2.54 to US$2.83 over twelve months. That's a 11% gain; respectable growth in the broader scheme of things.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Worthington Steel's EBIT margins are flat but, worryingly, its revenue is actually down. While this may raise concerns, investors should investigate the reasoning behind this.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
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 Worthington Steel's future EPS 100% free.
Are Worthington Steel Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Worthington Steel shares worth a considerable sum. We note that their impressive stake in the company is worth US$472m. That equates to 31% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.