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. 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.
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 Bio-Techne (NASDAQ:TECH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Bio-Techne with the means to add long-term value to shareholders.
Bio-Techne's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Bio-Techne has grown EPS by 6.3% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Bio-Techne remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 2.8% to US$1.1b. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Bio-Techne's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Bio-Techne Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$12b company like Bio-Techne. 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$124m. We note that this amounts to 1.0% of the company, which may be small owing to the sheer size of Bio-Techne but it's still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.
Should You Add Bio-Techne To Your Watchlist?
As previously touched on, Bio-Techne is a growing business, which is encouraging. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Even so, be aware that Bio-Techne is showing 1 warning sign in our investment analysis , you should know about...
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
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.