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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. 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Armstrong World Industries (NYSE:AWI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Armstrong World Industries with the means to add long-term value to shareholders.
Our free stock report includes 1 warning sign investors should be aware of before investing in Armstrong World Industries. Read for free now.
How Fast Is Armstrong World Industries Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Armstrong World Industries managed to grow EPS by 16% per year, over three years. That's a pretty good rate, if the company can sustain it.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Armstrong World Industries maintained stable EBIT margins over the last year, all while growing revenue 12% to US$1.4b. 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 Armstrong World Industries
Fortunately, we've got access to analyst forecasts of Armstrong World Industries' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Armstrong World Industries Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$6.0b company like Armstrong World Industries. But we do take comfort from the fact that they are investors in the company. Given insiders own a significant chunk of shares, currently valued at US$68m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.