We Ran A Stock Scan For Earnings Growth And Williams Companies (NYSE:WMB) Passed With Ease




  • In Business
  • 2022-09-26 14:39:39Z
  • By Simply Wall St.
 

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Williams Companies (NYSE:WMB). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Williams Companies with the means to add long-term value to shareholders.

View our latest analysis for Williams Companies

Williams Companies' Improving Profits

Williams Companies has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Williams Companies' EPS soared from US$0.95 to US$1.28, over the last year. That's a fantastic gain of 35%.

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. On the one hand, Williams Companies' EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

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.

Fortunately, we've got access to analyst forecasts of Williams Companies' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Williams Companies Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$36b company like Williams Companies. But we do take comfort from the fact that they are investors in the company. Given insiders own a significant chunk of shares, currently valued at US$99m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Is Williams Companies Worth Keeping An Eye On?

You can't deny that Williams Companies has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You still need to take note of risks, for example - Williams Companies has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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