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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 Restaurant Brands International (NYSE:QSR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Restaurant Brands International with the means to add long-term value to shareholders.
How Fast Is Restaurant Brands International 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. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Restaurant Brands International has grown EPS by 11% per year. That's a good rate of growth, if it can be sustained.
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. On the one hand, Restaurant Brands International's EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.
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 Restaurant Brands International's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Restaurant Brands International Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Although we did see some insider selling (worth US$9.4m) this was overshadowed by a mountain of buying, totalling US$30m in just one year. We find this encouraging because it suggests they are optimistic about Restaurant Brands International'sfuture. We also note that it was the company insider, J. Doyle, who made the biggest single acquisition, paying US$30m for shares at about US$60.77 each.
The good news, alongside the insider buying, for Restaurant Brands International bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$255m. While that is a lot of skin in the game, we note this holding only totals to 0.8% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.
Does Restaurant Brands International Deserve A Spot On Your Watchlist?
One positive for Restaurant Brands International is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. It is worth noting though that we have found 3 warning signs for Restaurant Brands International (1 is concerning!) that you need to take into consideration.
Keen growth investors love to see insider buying. Thankfully, Restaurant Brands International isn't the only one. You can see a 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.
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