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.' 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.
In contrast to all that, many investors prefer to focus on companies like Exxon Mobil (NYSE:XOM), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Exxon Mobil
Exxon Mobil's Improving Profits
In the last three years Exxon Mobil's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Exxon Mobil's EPS grew from US$6.03 to US$15.26, over the previous 12 months. It's not often a company can achieve year-on-year growth of 153%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Exxon Mobil is growing revenues, and EBIT margins improved by 8.5 percentage points to 19%, over the last year. Both of which are great metrics to check off for potential growth.
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Exxon Mobil's forecast profits?
Are Exxon Mobil Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$428b company like Exxon Mobil. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$488m. We note that this amounts to 0.1% of the company, which may be small owing to the sheer size of Exxon Mobil but it's still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.
Should You Add Exxon Mobil To Your Watchlist?
Exxon Mobil's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Exxon Mobil is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Exxon Mobil that you should be aware of.
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.
What are the risks and opportunities for Exxon Mobil?
Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas in the United States and internationally.
Rewards
Trading at 22.6% below our estimate of its fair value
Earnings grew by 139.2% over the past year
Risks
Earnings are forecast to decline by an average of 16% per year for the next 3 years
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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2023-06-05 11:06:26Z
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