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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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Nucor (NYSE:NUE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Nucor with the means to add long-term value to shareholders.
Check out our latest analysis for Nucor
Nucor's Improving Profits
Nucor has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Nucor's EPS shot up from US$23.23 to US$30.07; a result that's bound to keep shareholders happy. That's a fantastic gain of 29%.
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. Nucor maintained stable EBIT margins over the last year, all while growing revenue 14% to US$42b. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
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 Nucor.
Are Nucor Insiders Aligned With All Shareholders?
Since Nucor has a market capitalisation of US$43b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$288m. This comes in at 0.7% of shares in the company, which is a fair amount of a business of this size. This should still be a great incentive for management to maximise shareholder value.
Is Nucor Worth Keeping An Eye On?
You can't deny that Nucor 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. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. However, before you get too excited we've discovered 2 warning signs for Nucor (1 is significant!) that you should be aware of.