Does TransDigm Group (NYSE:TDG) Deserve A Spot On Your Watchlist?
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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 TransDigm Group (NYSE:TDG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for TransDigm Group
How Fast Is TransDigm Group Growing Its Earnings Per Share?
Over the last three years, TransDigm Group has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. TransDigm Group's EPS skyrocketed from US$16.69 to US$25.91, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 55%.
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. TransDigm Group shareholders can take confidence from the fact that EBIT margins are up from 43% to 45%, and revenue is growing. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of TransDigm Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are TransDigm Group Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$70b company like TransDigm Group. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. We note that their impressive stake in the company is worth US$263m. While that is a lot of skin in the game, we note this holding only totals to 0.4% of the business, which is a result of the company being so large. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.
Should You Add TransDigm Group To Your Watchlist?
For growth investors, TransDigm Group's raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Still, you should learn about the 3 warning signs we've spotted with TransDigm Group (including 2 which are potentially serious).
Although TransDigm Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com