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.  Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals.  A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Addus HomeCare (NASDAQ:ADUS). 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.

How Fast Is Addus HomeCare Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow.  That means EPS growth is considered a real positive by most successful long-term investors.   Shareholders will be happy to know that Addus HomeCare's EPS has grown 24% each year, compound, over three years.   If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.  

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.    Addus HomeCare maintained stable EBIT margins over the last year, all while growing revenue 11% to US$1.1b.  That's a real positive.  

In the chart below, you can see how the company has grown earnings and revenue, over time.  Click on the chart to see the exact numbers.

NasdaqGS:ADUS Earnings and Revenue History May 8th 2024

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

Are Addus HomeCare Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market.  Shareholders will be pleased by the fact that insiders own Addus HomeCare shares worth a considerable sum.     Indeed, they hold US$35m worth of its stock.  That shows significant buy-in, and may indicate conviction in the business strategy.   Even though that's only about 2.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.  

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable.  Our quick analysis into CEO remuneration would seem to indicate they are.    Our analysis has discovered that the median total compensation for the CEOs of companies like Addus HomeCare with market caps between US$1.0b and US$3.2b is about US$5.7m.  

Addus HomeCare offered total compensation worth US$4.2m to its CEO in the year to December 2023.  That comes in below the average for similar sized companies and seems pretty reasonable.   CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests.  It can also be a sign of a culture of integrity, in a broader sense.

Does Addus HomeCare Deserve A Spot On Your Watchlist?

For growth investors, Addus HomeCare's raw rate of earnings growth is a beacon in the night.   If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership.  Everyone has their own preferences when it comes to investing but it definitely makes Addus HomeCare look rather interesting indeed.     Now, you could try to make up your mind on Addus HomeCare by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.