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.
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 Chemed (NYSE:CHE). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
How Fast Is Chemed Growing Its Earnings Per Share?
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. Chemed boosted its trailing twelve month EPS from US$16.30 to US$20.12, in the last year. This amounts to a 23% gain; a figure that shareholders will be pleased to see.
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. Chemed maintained stable EBIT margins over the last year, all while growing revenue 6.8% to US$2.4b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Chemed's forecast profits?
Are Chemed Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$9.1b company like Chemed. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$151m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
Is Chemed Worth Keeping An Eye On?
One important encouraging feature of Chemed is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You still need to take note of risks, for example - Chemed has 1 warning sign we think you should be aware of.
Although Chemed 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.
