The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.
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 Greenbrier Companies (NYSE:GBX). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Greenbrier Companies with the means to add long-term value to shareholders.
View our latest analysis for Greenbrier Companies
How Fast Is Greenbrier Companies 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 means EPS growth is considered a real positive by most successful long-term investors. Greenbrier Companies managed to grow EPS by 10% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It’s noted that Greenbrier Companies’ revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The music to the ears of Greenbrier Companies shareholders is that EBIT margins have grown from 2.7% to 5.2% in the last 12 months and revenues are on an upwards trend as well. That’s great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
While we live in the present moment, there’s little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Greenbrier Companies?
Are Greenbrier Companies Insiders Aligned With All Shareholders?
It’s pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Greenbrier Companies insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at US$37m. This considerable investment should help drive long-term value in the business. Even though that’s only about 3.2% of the company, it’s enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Is Greenbrier Companies Worth Keeping An Eye On?
One positive for Greenbrier Companies is that it is growing EPS. That’s nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. Even so, be aware that Greenbrier Companies is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant…
Although Greenbrier Companies certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
What are the risks and opportunities for Greenbrier Companies?
The Greenbrier Companies, Inc. designs, manufactures, and markets railroad freight car equipment in North America, Europe, and South America.
Rewards
Price-To-Earnings ratio (18.8x) is below the Machinery industry average (20.4x)
Earnings are forecast to grow 31.37% per year
Earnings grew by 33.3% over the past year
Risks
Interest payments are not well covered by earnings
Large one-off items impacting financial results
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
