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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. 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.
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 Installed Building Products (NYSE:IBP). 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.
Installed Building Products' Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Installed Building Products has grown EPS by 32% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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 Installed Building Products remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.9% to US$2.9b. 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.
View our latest analysis for Installed Building Products
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 Installed Building Products' future EPS 100% free.
Are Installed Building Products 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. So it is good to see that Installed Building Products insiders have a significant amount of capital invested in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$778m. Coming in at 16% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.