Here's Why We Think Goosehead Insurance (NASDAQ:GSHD) Might Deserve Your Attention Today
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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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Goosehead Insurance (NASDAQ:GSHD). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Goosehead Insurance with the means to add long-term value to shareholders.
Check out our latest analysis for Goosehead Insurance
Goosehead Insurance'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. It certainly is nice to see that Goosehead Insurance has managed to grow EPS by 25% per year over three years. This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.
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. Goosehead Insurance maintained stable EBIT margins over the last year, all while growing revenue 14% to US$275m. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Goosehead Insurance?
Are Goosehead Insurance 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The good news is that Goosehead Insurance insiders spent a whopping US$1.1m on stock in just one year, without so much as a single sale. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the President, Mark Miller, who made the biggest single acquisition, paying US$581k for shares at about US$58.14 each.