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. 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. 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 Intuitive Surgical (NASDAQ:ISRG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

How Fast Is Intuitive Surgical Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Intuitive Surgical has grown EPS by 19% per year, compound, in the last three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for Intuitive Surgical remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to US$7.3b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Intuitive Surgical's future EPS 100% free.

Are Intuitive Surgical Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$153b company like Intuitive Surgical. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Notably, they have an enviable stake in the company, worth US$774m. This comes in at 0.5% of shares in the company, which is a fair amount of a business of this size. This still shows shareholders there is a degree of alignment between management and themselves.

Should You Add Intuitive Surgical To Your Watchlist?

For growth investors, Intuitive Surgical's raw rate of earnings growth is a beacon in the night. 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. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Intuitive Surgical shapes up to industry peers, when it comes to ROE.

Although Intuitive Surgical certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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

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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.

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