It’s only natural that many investors, especially those new to the game, would prefer to buy âhotâ stocks with a good story, even if those companies are losing money. Unfortunately, high-risk investments are often unlikely to pay off, and many investors pay a price to learn their lesson.
If, on the other hand, you like businesses that have revenue, and even profits, then you might be interested in Capital One Financial (NYSE: COF). While that doesn’t make stocks worth buying at all costs, you can’t deny that successful capitalism ultimately requires profits. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when in a hurry.
Check out our latest review for Capital One Financial
How fast is Capital One Financial growing?
The market is a short-term voting machine, but a long-term weighing machine, so the stock price eventually follows earnings per share (EPS). Therefore, many investors like to buy stocks of companies with growing EPS. Who among us wouldn’t applaud Capital One Financial’s stratospheric annual growth in 56% compound EPS over the past three years? This kind of growth never lasts for long, but like a shooting star, it’s worth watching when it does.
A close look at growth in income and profit margins before interest and taxes (EBIT) can help inform a vision on the sustainability of recent earnings growth. Not all of Capital One Financial’s income this year is income operations, so keep in mind that the revenue and margin numbers I used might not be the best representation of the underlying business. Capital One Financial has maintained stable EBIT margins over the past year, while increasing revenues 89% to US $ 32 billion. Itâs really positive.
In the graph below, you can see how the business has increased its profit and revenue over time. For more details, click on the image.
Fortunately, we have access to analysts’ forecasts from Capital One Financial future profits. You can make your own predictions without looking, or you can take a look at what the pros are predicting.
Are Capital One Financial Insiders Aligned With All Shareholders?
We wouldn’t expect to see insiders owning a significant percentage of a US $ 64 billion company like Capital One Financial. But we are reassured by the fact that they have invested in the company. Indeed, they have invested a sparkling mountain of wealth, currently valued at US $ 640 million. This suggests to me that management will be very attentive to the interests of shareholders when making a decision!
Should you add Capital One Financial to your watchlist?
Capital One Financial’s earnings per share took off like a rocket pointed straight at the moon. This type of growth is simply eye-catching, and the significant investment held by insiders certainly informs my vision for the business. Sometimes the rapid growth of BPA is a sign that the business has reached an inflection point; and I like those. So, in my opinion, Capital One Financial deserves to be put on your watch list; after all, shareholders do well when the market underestimates fast-growing companies. You should always take note of risks, for example – Capital One Financial has 2 warning signs (and 1 which is significant) we think you should be aware of.
You can invest in any business. But if you’d rather focus on stocks that have been the subject of insider buys, here’s a list of companies that have made insider buys in the past three months.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.