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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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Waste Management (NYSE:WM), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for Waste Management
How Fast Is Waste Management Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Waste Management grew its EPS by 14% per year. That growth rate is fairly good, assuming the company can keep it up.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for Waste Management remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.2% to US$20b. 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. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Waste Management's forecast profits?
Are Waste Management Insiders Aligned With All Shareholders?
Owing to the size of Waste Management, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$131m. We note that this amounts to 0.2% of the company, which may be small owing to the sheer size of Waste Management but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.
Is Waste Management Worth Keeping An Eye On?
One important encouraging feature of Waste Management is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. Even so, be aware that Waste Management is showing 1 warning sign in our investment analysis , you should know about...