December 2, 2021

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Remarkable business & finance

With EPS Growth And More, Northrop Grumman (NYSE:NOC) Is Interesting

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 completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Northrop Grumman (NYSE:NOC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Northrop Grumman

How Quickly Is Northrop Grumman Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Northrop Grumman managed to grow EPS by 9.4% per year, over three years. That’s a pretty good rate, if the company can sustain it.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Northrop Grumman is growing revenues, and EBIT margins improved by 2.4 percentage points to 12%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company’s revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

NYSE:NOC Earnings and Revenue History November 3rd 2021

While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Northrop Grumman?

Are Northrop Grumman Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$56b company like Northrop Grumman. But we do take comfort from the fact that they are investors in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$126m. This suggests to me that leadership will be very mindful of shareholders’ interests when making decisions!

Does Northrop Grumman Deserve A Spot On Your Watchlist?

One important encouraging feature of Northrop Grumman is that it is growing profits. If that’s not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. It is worth noting though that we have found 3 warning signs for Northrop Grumman (1 makes us a bit uncomfortable!) that you need to take into consideration.

Although Northrop Grumman certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.

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

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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https://simplywall.st/stocks/us/capital-goods/nyse-noc/northrop-grumman/news/with-eps-growth-and-more-northrop-grumman-nysenoc-is-interes