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. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Juniper Networks (NYSE:JNPR). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for Juniper Networks
How Quickly Is Juniper Networks Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Juniper Networks managed to grow EPS by 7.1% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction. EPS growth figures have also been helped by share buybacks, showing the market that the company is in a position of financial strength, allowing it to return capital to shareholders.
It’s often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company’s growth. Juniper Networks shareholders can take confidence from the fact that EBIT margins are up from 9.2% to 11%, and revenue is growing. Both of which are great metrics to check off for potential growth.
The chart below shows how the company’s bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Juniper Networks’ forecast profits?
Are Juniper Networks Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$9.0b company like Juniper Networks. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$115m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.
Should You Add Juniper Networks To Your Watchlist?
One positive for Juniper Networks is that it is growing EPS. That’s nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. It’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 1 warning sign with Juniper Networks , and understanding this should be part of your investment process.
There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Valuation is complex, but we’re helping make it simple.
Find out whether Juniper Networks is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
