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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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Waste Management (NYSE:WM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Waste Management with the means to add long-term value to shareholders.
See our latest analysis for Waste Management
Waste Management's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Waste Management managed to grow EPS by 9.8% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
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. While we note Waste Management achieved similar EBIT margins to last year, revenue grew by a solid 12% to US$19b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Waste Management's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Waste Management Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$64b company like Waste Management. 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$109m. 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.
Should You Add Waste Management To Your Watchlist?
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. These two factors are a huge highlight for the company which should be a strong contender your watchlists. However, before you get too excited we've discovered 1 warning sign for Waste Management that you should be aware of.