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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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like W.W. Grainger (NYSE:GWW), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide W.W. Grainger with the means to add long-term value to shareholders.
View our latest analysis for W.W. Grainger
How Quickly Is W.W. Grainger Increasing Earnings Per Share?
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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. W.W. Grainger's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 45%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. W.W. Grainger maintained stable EBIT margins over the last year, all while growing revenue 13% to US$16b. 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. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of W.W. Grainger's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are W.W. Grainger Insiders Aligned With All Shareholders?
Owing to the size of W.W. Grainger, we wouldn't expect insiders to hold a significant proportion of the company. 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. Notably, they have an enviable stake in the company, worth US$3.1b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.