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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like PulteGroup (NYSE:PHM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide PulteGroup with the means to add long-term value to shareholders.
How Quickly Is PulteGroup Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that PulteGroup's EPS has grown 22% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. PulteGroup maintained stable EBIT margins over the last year, all while growing revenue 8.9% to US$18b. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
See our latest analysis for PulteGroup
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 PulteGroup's future EPS 100% free.
Are PulteGroup Insiders Aligned With All Shareholders?
Since PulteGroup has a market capitalisation of US$21b, we wouldn't expect insiders to hold a large percentage of shares. 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$157m. We note that this amounts to 0.8% of the company, which may be small owing to the sheer size of PulteGroup but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.