Here's Why We Think GATX (NYSE:GATX) Is Well Worth Watching

In This Article:

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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in GATX (NYSE:GATX). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for GATX

How Fast Is GATX Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, GATX has achieved impressive annual EPS growth of 39%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. It's noted that GATX's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note GATX achieved similar EBIT margins to last year, revenue grew by a solid 13% to US$1.5b. 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.

earnings-and-revenue-history
NYSE:GATX Earnings and Revenue History November 19th 2024

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

Are GATX Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$5.4b company like GATX. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at US$34m. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.6% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Waiting for permission
Allow microphone access to enable voice search

Try again.