Yahoo Finance Does Brickworks (ASX:BKW) Deserve A Spot On Your Watchlist?
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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Brickworks (ASX:BKW). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Brickworks with the means to add long-term value to shareholders.
View our latest analysis for Brickworks
Brickworks' Improving Profits
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Brickworks grew its EPS from AU$1.61 to AU$5.73, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
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. Brickworks shareholders can take confidence from the fact that EBIT margins are up from 2.3% to 4.5%, and revenue is growing. Both of which are great metrics to check off for potential growth.
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.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Brickworks' future profits.
Are Brickworks Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Even though some insiders sold down their holdings, their actions speak louder than words with AU$357k more invested than sold by people who know they company best. An optimistic sign for those with Brickworks in their watchlist. Zooming in, we can see that the biggest insider purchase was by MD & Executive Director Lindsay Partridge for AU$715k worth of shares, at about AU$21.57 per share.
The good news, alongside the insider buying, for Brickworks bulls is that insiders (collectively) have a meaningful investment in the stock. Holding AU$129m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This should keep them focused on creating long term value for shareholders.
Should You Add Brickworks To Your Watchlist?
Brickworks' earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Brickworks deserves timely attention. What about risks? Every company has them, and we've spotted 3 warning signs for Brickworks (of which 2 are potentially serious!) you should know about.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Brickworks, you'll probably love this free list of growing companies that insiders are buying.
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.
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