Yahoo Finance Here's Why We Think Chegg (NYSE:CHGG) Is Well Worth Watching
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Chegg (NYSE:CHGG). 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 Chegg
How Fast Is Chegg Growing Its Earnings Per Share?
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. It's an outstanding feat for Chegg to have grown EPS from US$0.002 to US$2.30 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.
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 Chegg's EBIT margins are down, it's not all bad news as revenues are at least stable. While some people may not be too phased, this could be a sticking point for some investors.
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 Chegg's future profits.
Are Chegg Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Insider selling of Chegg shares was insignificant compared to the one buyer, over the last twelve months. To be exact, Independent Director Theodore Schlein put their money where their mouth is, paying US$1.0m at an average of price of US$28.54 per share That can definitely be seen as a sign of conviction.
On top of the insider buying, it's good to see that Chegg insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$103m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add Chegg To Your Watchlist?
Chegg's earnings per share growth have been climbing higher at an appreciable rate. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Chegg belongs near the top of your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Chegg (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Chegg, 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.
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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.
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