Yahoo Finance With EPS Growth And More, W.W. Grainger (NYSE:GWW) Makes An Interesting Case
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like W.W. Grainger (NYSE:GWW). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide W.W. Grainger with the means to add long-term value to shareholders.
See our latest analysis for W.W. Grainger
W.W. Grainger's Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, W.W. Grainger has achieved impressive annual EPS growth of 37%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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. While we note W.W. Grainger achieved similar EBIT margins to last year, revenue grew by a solid 6.1% to US$17b. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed 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 W.W. Grainger?
Are W.W. Grainger Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$44b company like W.W. Grainger. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$4.1b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to W.W. Grainger, with market caps over US$8.0b, is around US$14m.
W.W. Grainger's CEO took home a total compensation package worth US$10m in the year leading up to December 2023. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is W.W. Grainger Worth Keeping An Eye On?
W.W. Grainger's earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so the writing on the wall tells us that W.W. Grainger is worth considering carefully. Still, you should learn about the 1 warning sign we've spotted with W.W. Grainger.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
